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Use the following information and the APV decision rule, to answer the following questions. A seller has offered you a $1,500,000 interest only 7 year loan at 6% annual payments), when market interest rates on such loans are 7%. You face a 35% marginal income tax rate.
a) Basing your decision on market values, how much more should you be willing to pay for the property than you otherwise think it is worth, due to the financing offer?
b) Answer the same question only now basing your answer on investment value rather than market value.
Non-Cancellable
A contract or agreement that cannot be terminated or cancelled by either party involved.
Future Sacrifice
The expected loss or cost in the future due to present decisions or commitments.
Essential Characteristic
A fundamental or inherent property that defines an entity, distinguishing it from others.
Liability
A company's financial debts or obligations that arise during the course of business operations.
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