Question

Answer the following questions about different loan scenarios faced by businesses. Use the online loan calculator located at http://www.loancalculator.org/ to help you do your calculations.

Answer 1

The owners of a successful restaurant want a loan for $50,000 to renovate the kitchen and expand the dining room. They expect that the extra tables will add between $2,000 and $5,000 to the restaurant’s monthly revenue. The bank is willing to let the business have an intermediate-term loan of $50,000 for five years at an interest rate of 6.5 percent. Calculate the monthly payment and explain whether taking this loan is a smart business decision.

Answer 2

@Vocaloid

Answer 3

well I'm not familiar with finance but from what I can tell - they gave you a website where you can enter the loan amount, loan length, interest rate and get the monthly payment

Answer 4

I am not sure what kind of conclusion they want you to draw from this, I guess since the monthly payment is only 1,000 and the income generated is more than enough to cover the monthly loan payment, then perhaps it is a smart decision move :S

Answer 5

@zarkam21

Answer 6

the monthly payment would be 978.31 right

Answer 7

yes

Answer 8

okay amd it wouldn;t be a smart decision because of the high interest rate? :/

Answer 9

well, I was thinking more along the lines of, the monthly payment is only ~ $1000 but buying the extra tables gives them an extra $2000-5000 of income

idk what factors your teacher wants you to consider though, interest rate is relevant

Answer 10

OKay I was looking through the material that is provided. So yeah, all things are revelent, just have to point out all of the reasons why it would be nonethical to take this loan

Answer 11

It maybe a smart decision because the monthly payment is only ~ $1000 but buying the extra tables gives them an extra $2000-5000 of income. However in contrary, another this to consider is the interest rate which is not the lowest.

Answer 12

good

Answer 13

A landlord wants to acquire an additional apartment building for $250,000. The new building contains eight apartment units, which will each rent for $500 per month. The bank is willing to loan the landlord the money for a long-term, 30-year loan at a 5.5 percent interest rate. Calculate the monthly payment and explain whether taking this loan for the new building is a smart business decision.

Answer 14

well first thing would be to plug this stuff into the loan calculator given

http://www.loancalculator.org/

loan amouont = 250,000
loan length in months = 30 years * 12 months = 360 months
interest rate = 5.5

that'll give you the monthly payment

now, monthly revenue is the # of apartments (8) times the rent for the apartment (500), you could consider this along with other factors like the loan duration/interest rate/etc. to make your conclusion

Answer 15

oh you already did that, sweet

Answer 16

so I would take the monthly payment and multiply it by 8? I am not sure

Answer 17

the monthly payment is what the landlord pays, that's a separate calculation

to calculate what the landlord makes, it's just the number of rooms times the monthly rent he is charging for the room, so 8 * 500

Answer 18

ir is the monthly payment just 1419.47

Answer 19

Oh okay

Answer 20

So I think this would be good because the landlord will be charging the number of rooms times the monthly rent for the room, which will be 8 * 500 =4000

Answer 21

I mean I am not sure, what do you think

Answer 22

yeah, that's a good start

I guess as something to consider, that number assumes that all the apartments will be rented at all times which may not always be the case

along with that you could consider the interest rate and duration of the loan, etc. which may be drawbacks

Answer 23

An online store that has been successfully growing on its initial angel investment and revenue wants to invest $5 million to expand the business. The bank is willing to lend the business this money at a 10 percent interest rate over an eight-year term. Calculate the monthly payment and explain what the business must be able to do with this money in order for this to be a smart business decision.

Answer 24

well the monthly payment is just a matter of plugging stuff into the calculator

I'm not sure what they're looking for for the last question, but I would think that the store must be able to prove that this money will be invested towards things that will improve the revenue enough to cover the cost of the loan + make profit

Answer 25

Okay got it. thanks

Answer 26

I will write something that goes along those lines. Thank you !!