John is trying to raise debt from a prospective venture investor, Angel LLC. Angel indicated to John that the annual int...
John is trying to raise debt from a prospective venture investor, Angel LLC. Angel indicated to John that the annual interest rate on risky venture loans is currently 15 percent. John is seeking a 4-year loan with annual payments. He is willing to pay back $100,000 at the end of 4 years. However, due to cash flow problems, he can only afford to pay interest at a 12 percent annual rate. Calculate the dollar amount that Angel venture investors would lend to John.
Homework Answers
Dollar amount that the Angel venture investors would lend to John. = $91435.06
Workings:
Using the following in a financial calculator or excel:
| NPER | 4 | |
| FV | 100000 | |
| PMT | 12000 | [100,000*12%] |
| Rate | 15% | |
| PV | 91435.06 | [-pv(rate,nper,pmt,fv,0) |
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