Corporate finance

Twin brother and sister, Carl and Christy graduated several years ago from college. Carl, an architect, has worked in home design with Bulte Homes since graduation. Christy, a civil engineer, works with Butler Industries in structural components and analysis. They both reside in Richmond, Virginia. They have started a creative e-commerce network through which Virginia-based builders can buy their “spec home” plans and construction materials much more cheaply. Carl and Christy want to expand into a regional e-business corporation. They have gone to the Bank of America (BA) in Richmond for a business development loan.

Identify some factors that might cause the loan rate to vary when BA provides the quote. Also, indicate any impact on the established MARR when Carl and Christy make economic decisions for their business.

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Finally, a compromise proposal offered by the Medford mayor might be acceptable to Brewster. Reduce the annual fee by 50%, and reduce the per event charges to the same amount that the Medford fire chief estimates it will cost if the truck is owned. Then Medford will possibly adjust (if it seems reasonable) the sum of the insurance premium reduction and property loss reduction estimates to just make the arrangement with Brewster more attractive than owning the truck.

Find this sum (for the estimates of premium reduction and property loss reduction). Does this new sum seem reasonable relative to the previous estimates?

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