Cashback Offer from 1st to 15th March 2021. Get Flat 20% Cashback credited to your account for a minimum transaction of $80. Post Your Question Today!

Question DetailsNormal
$ 7.00

LOAN DECISION PAPER

Question posted by
Online Tutor Profile
request

Congratulations! You are a proud owner of an engraving business. However, you are using an aging rotary engraver to engrave plaques and trophies. The machine has been reliable, but does require regular maintenance and periodic replacement of parts. You have just found out that this engraver will no longer be supported by the manufacturer. This means that service and parts will be hard to get in the future and if it breaks it could take up to three weeks to get a new one up and running. You keep this machine running almost 8 hours a day, every day. Every day that the engraver is down will cost around $975 in lost income.

If you have to buy a new engraver, it would cost around $25,000.

You can get a one-year loan at 12% to buy a new engraver, but you worry that this is a lot of money to spend, especially since the old engraver is still working fine. You have to make a decision.

In this discussion, pose you argument on whether you should purchase a new engraver now or wait until the old engraver breaks before ordering a new engraver?

To help you construct your argument answer the following steps:

  1. The local bank will loan you $25,000 for 1 year at an interest rate of 12% with only one payment due at the end of the year. If you borrow the full $25,000 for the new engraver, what will the total cost of the loan be?
  2. Calculate the total amount of revenue (gross profit) that will be lost if the engraver breaks and is down for 18 business days.
  3. If the engraving business makes $975 per day in revenue and generates a net profit of 25%, how much profit is generated per day?
  4. Given a 25% profit margin and $975 per day in revenue, how many days would it take for the new engraver to earn back the total cost of purchase, if the entire net profit were allocated to pay for the unit?
  5. What other factors should you consider in order to make a good business decision?
Available Answer
$ 7.00

[Solved] LOAN DECISION PAPER

  • This Solution has been Purchased 1 time
  • Submitted On 21 Dec, 2015 04:27:45
Answer posted by
Online Tutor Profile
solution
Congratulations! You are a proud owner of an engraving business. However, you are using an aging rotary engraver to engrave plaques and trophies. The machine has been reliable, but does require regular maintenance and periodic replacement of parts. You have just found out that this engraver will no longer be supported by the manufacturer. This means that service and parts will be hard to get in the future and if it breaks it could take up to three weeks to get a new one...
Buy now to view the complete solution
Other Similar Questions
User Profile
Acade...

LOAN DECISION PAPER

Congratulations! You are a proud owner of an engraving business. However, you are using an aging rotary engraver to engrave plaques and trophies. The machine has been reliable, but does require regular maintenance and periodi...

The benefits of buying study notes from CourseMerit

homeworkhelptime
Assurance Of Timely Delivery
We value your patience, and to ensure you always receive your homework help within the promised time, our dedicated team of tutors begins their work as soon as the request arrives.
tutoring
Best Price In The Market
All the services that are available on our page cost only a nominal amount of money. In fact, the prices are lower than the industry standards. You can always expect value for money from us.
tutorsupport
Uninterrupted 24/7 Support
Our customer support wing remains online 24x7 to provide you seamless assistance. Also, when you post a query or a request here, you can expect an immediate response from our side.
closebutton

$ 629.35