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Finger [1]
3 years ago
9

On December 31, 2020, Buffalo Company signed a $1,278,400 note to Carla Bank. The market interest rate at that time was 10%. The

stated interest rate on the note was 8%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Buffalo’s financial situation worsened. On December 31, 2022, Carla Bank determined that it was probable that the company would pay back only $767,040 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,278,400 loan.
Determine the amount of cash Buffalo received from the loan on December 31, 2020. (Round present value factors to 5 decimal places, e.g. 0.52513 and final answer to 0 decimal places, e.g. 5,275.)

Business
1 answer:
Zarrin [17]3 years ago
4 0

Answer:

Explanation:

The detailed steps and calculation is as shown in the attached files.

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An investment that costs $5,800 will produce annual cash flows of $2,480 for a period of 4 years. Given a desired rate of return
aleksandrvk [35]

Based on the present value of the annual cash flows and the investment cost, the present value index is 1.39

<h3>How is the present value index calculated?</h3>

To find the present value index, use the formula:

= Present value of cash flow/Investment cost

The present value of cash flow is:

= Annual cash flows x Present value interest factor of annuity, 9%, 4 years

= 2,480 x 3.239719877

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The present value index is:

= 8,034.51 / 5,800

= 1.39

Find out more on present value index at brainly.com/question/23259683

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8 0
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3 years ago
Cartoon caricatures of politicians that exaggerate certain characteristics can be persuasive due to their:
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Income Statement Sections During the current year, David Corporation sold a segment of its business at a gain of $210,000. Until
Montano1993 [528]

Answer:

Answer is given below.

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