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In connection to this he decided to visit the top three largest banks. He began with imperial bank, Imperial bank was offering the mortgage at 15% interest. However, the owner of the facility has to contribute 10 % of the amount he is requesting. However, the interest rate is not constant, it will be changing in accordance with the rates of the Central Bank. Barclays Bank was offering an interest rate of 10 %, this rate was constant, however, the owner of the facility has to contribute 10 % of the facility and then the bank will take the responsibility of purchasing the building materials for the owner. The final bank was, Finlay Bank, was offering 12 % interest rate loan, however in case the of permanent disability or death then the borrowed amount will be waivered.
Bernard has a difficulty in deciding which bank to take the mortgage with, therefore he has decided to use multiple criteria decision analysis (MCDA) to solve the problem. In connection to this he has listed the most important factors to consider: - 1) interest rate 2) Flexibility in payments 3) duration 4) Guarantees.
CMDA is an important analytical tool that can be used to solve problems especially when someone is in a dilemma (Marie 2010, pg. 14). The tool has all the important qualities of a decisive tool. It is basically used to (Adams 2009, pg. 26);
Data collection; He went to the internet and found out that the most important factors to consider when taking a mortgage are: Legal costs, Valuation, mortgage arrangement fees, mortgage rates, portability, and mortgage related insurance (Jones 2006, pg. 47).
Now that the problem has been identified as interest rate, valuation fees, mortgage arrangement fees, and insurance fees. In this connection, the next step is Bernard to understand the relationship between these factors.
From the diagram we see that the only bank that is offering alternatives to mortgage is Imperial bank. The alternatives that the
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In most cases such inefficiencies are caused by monopoly pricing or taxation (Brent 89). In other words, a deadweight loss can be termed as the total surplus resulting from market distortion especially from the side of government regulations on prices and in most cases the levied taxes.
YEAR 1 t= 1 yr S=P(1+rt) 158000= P(1+(0.07)(1)) P= $147663.55 S= 246000 r= 7% P= ? YEAR 2 t= 2 yr S=P(1+rt) 246000= P(1+(0.07)(2)) P= $215789.47 S= 289000 r= 7% P= ? YEAR 3 t= 3 yr S=P(1+rt) 289000= P(1+(0.07)(3)) P= $238842.97 Amount you have to invest today for all 3 future payments is: P= $602296 Money on hand today is worth more than tomorrow, therefore it is important that we understand the concept of time value of money.
Now, IST is supposed to raise capital worth $500 million in order to build a fresh production facility. In the occurrence of a financial distress, the company would experience a great loss of both consumers as well as engineering talents. If IST takes a debt of $500 million, the managers of the company are afraid that the present value of the cost of financial distress would be more than the tax benefits by an amount of $20 million.
These types of problems (especially systems of differential equations) are solved numerically using a number of similar algorithms which are based on the principles of numerical integration. The definition of the task "solve differential equation" means "integrate differential equation" so all differential equation numerical solving techniques are based on numerical integration, which is the problem of finding area under the curve described by differentiated function.
Any cost or benefit that does not differ between alternatives is irrelevant and can be ignored in a decision. The reduction in direct labor and variable overhead by 10% alongside with the reduction in direct material costs by 20% must outweigh the price of $10.50 per a pair of bindings.
This shows that company has no problem in paying off its debts. The position of Jones Corporation is also good and it will have no problem in paying off its debts. Since, both firms can pay-off their debts easily given the situation let's now eliminate the illiquid current asset factor from our ratio calculation.
She has excellent curriculum vitae with a high grade point average and a strong record of campus participation in clubs and activities.
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Free cash flow model of valuation estimates value of a firm based on its fundamentals. The company is expected to pay its shareholders based on intrinsic value of the firm. In addition, this value is reflected by net present cash flow. It’s
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