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Problem 3 Refer to question 2. Suppose you now use the truck for business purposes and your tax rate is 40%. A) What us the cash value of the...

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Question 2 a) total $25000, down payment $5000 market interest rate 10%, 60 monthly pmt, dealer monthly rate 5%

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Problem 3
Refer to question 2. Suppose you now use the truck
for business purposes and your tax rate is 40%.
A) What us the cash value of the
dealer's below market interest rate,
5%
B) Show that value of part A equals the
additional down-payment you will
have to make, if you were to make a
cash purchase financed by the bank
loan. Note: When you make a loan for business, any
interest you pay is tax deductible.

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Problem 1 The federal government gives young entrepreneurs
a loan belowr market rate. You are eligible for
$10,000 3-year loan from FBD at a rate of 4%. The
current market interest rate is 10%. What is the PV of your annual savings if you take
the loan from GBD? The loan will be repaid in equal
year-end payments over loan term. iii

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Question 2) Show the cash value in question 1
equals the additional down payment you will have to
make if you were to make a cash purchase of the
truck financed by a bank with equal payments
required by the dealer. The bank uses an interest
rate of 10% per year.

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