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1.Award: 0 out of 0.00 pointsDaniel Kaffe, CFO of Kendrick Enterprises, is evaluating a 10-year, 5.9 percent loan with gross proceeds of$5,970,000. The interest payments on the loan will be made annually. Flotation costs are estimated to be1.6 percent of gross proceeds and will be amortized using a straight-line schedule over the 10-year life ofthe loan. The company has a tax rate of 34 percent, and the loan will not increase the risk of financialdistress for the company.a.Calculate the net present value of the loan excluding flotation costs. (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.)
b.Calculate the net present value of the loan including flotation costs. (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.)
References
Worksheet
Section: 18.6 APV ExampleDaniel Kaffe, CFO of Kendrick Enterprises, is evaluating a 10-year, 5.9 percent loan with gross proceeds of$5,970,000. The interest payments on the loan will be made annually. Flotation costs are estimated to be1.6 percent of gross proceeds and will be amortized using a straight-line schedule over the 10-year life ofthe loan. The company has a tax rate of 34 percent, and the loan will not increase the risk of financialdistress for the company.a.Calculate the net present value of the loan excluding flotation costs. (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.)Net present value$ b.Calculate the net present value of the loan including flotation costs. (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.)
Explanation:

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