Question
please help me with these two problems
What rate of return per month will an entrepreneur make over 3 year project period if he invested $200,000 to produce portable 12-volt air compressors? His estimated monthly costs are $30,000 with income of $35,000 per month. SAAB Bank lent a newly graduated engineer $ 2000 at i = 8% per year for 5 years to buy home office furniture. From the bank's perspective (the lender), the investment in this young engineer is expected to produce an equivalent net cash flow of & 315.47 for each of 4 years. A = $2000 (A/P, 8%, 4) = $ This represents a 8% per year rate of return on the bank's unrecovered balance. Compute the amount of the unrecovered investment for each of the 4 years using: The rate of return on the unrecovered balance (correct basis), The return on the initial $2000 investment. Explain why all the initial $2000 amount is not recovered by the final payment in part (b).
Explanation / Answer
Problem 1 : Profit per month : 35000-30000=5000
Rate of return per month : Monthly profit/ Investment=5000/200000=2.5%
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