loan installment compu=ound annually non=cummulative par value,, preferred stock

| July 29, 2016

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Your company has negotiated the purchase of some land, a building, equipment, and vehicles for $2,000,000. The

appraised values of these assets is as follows:


Land 1,000,000

Building 550,000

Equipment 630,000

Vehicles 120,000

total 2,300,000


There are two choices to finance the acquisition of these assets: one, would be to obtain an installment loan from

City National Bank at 9.0% for 6 years (compounded annually). The other choice would be to issue non-cumulative,

$125 par value, 10% preferred stock.




Compute the values of the acquired assets based on the appraised values (5 points) and prepare the resulting

journal entry (5 points).


Compute the payment on the loan (5 points) and prepare the repayment schedule (10 points).


Prepare a written analysis of the two financing options (at least 100 words), discussing the advantages (5 points) and

disadvantages ( 5 points) of each (for a total of 20 points).


Finally, provide your recommendation (5 points), based on the advantages and disadvantages mentioned in your

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