| Question |
Refer to Problem 12-33. To pay for the pickup truck the Ogi Corp. obtained a $10,000 loan from the truck dealer, payable in four end-of-year payments of $2500 plus 10% interest on the loan balance each year. (a) Compute the after-tax rate of return for the truck together with the loan. Note that the interest on the loan is tax deductible, but the $2500 principal payments are not. (b) Why is the after-tax rate of return computed in part (a) so much different from the 12.5% obtained in Problem 12-33? |
