Paul Carter Requests an Automobile Loan of $15,000 That Will

question 79

Multiple Choice

Paul Carter requests an automobile loan of $15,000 that will be repaid over the next four years in monthly repayments.The First National Bank tells Mr.Carter that his total finance charges will be $4675.20.What is the APR on this loan?

• A)16 percent
• B)1 percent
• C)14 percent
• D)7 percent
• E)None of the options is correct

---

Definitions:

WACC

The calculation used by firms to evaluate the cost of their financing and investments, taking into account the weighted proportions of each source of capital, including equity and debt.

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.

Capital Budgeting

The process of evaluating and selecting long-term investments that are consistent with the firm's goal of wealth maximization.

After-Tax Cost

The net cost of a transaction or investment after the effects of taxes are considered, often used in analyzing the cost of financing options.