Maxwell Gardens Requires a $100,000 Annual Loan in Order to Pay

question 33

Multiple Choice

Maxwell Gardens requires a $100,000 annual loan in order to pay laborers to tend and harvest its organic vegetable crop.Maxwell borrows on a discount interest basis at a nominal annual rate of 11 percent.If Maxwell must actually receive $100,000 net proceeds to finance its crop, then what must be the face value of the note?

• A) $111,000
• B) $100,000
• C) $112,360
• D) $89,000
• E) $108,840

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Definitions:

Equity-Financed

A method of funding in which a company raises capital through the sale of shares, effectively trading ownership interest for investment funds.

Incremental Value

The additional or extra value generated by taking a particular action, often compared to doing nothing or choosing an alternative.

Goodwill

An intangible asset that arises when a company acquires another business for more than the value of its tangible and identifiable intangible assets.

Fixed Assets

Long-term tangible assets that a company uses in its operations and that are not expected to be consumed or converted into cash within one year.