A Company Borrowed $300,000 Cash from the Bank by Signing

question 117

Multiple Choice

A company borrowed $300,000 cash from the bank by signing a five-year,8% installment note.The present value factor for an annuity at 8% for five years is 3.9927.Each annuity payment equals $75,137.How much cash did the company receive from the bank on the day they borrowed this money?

• A)$75,137
• B)$94,013
• C)$300,000
• D)$375,685
• E)$1,197,810

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Definitions:

Deadweight Losses

Economic inefficiencies that occur when the market equilibrium is not achieved, often due to external interference such as taxes or monopolies, resulting in a loss of total surplus.

Distort Incentives

When external factors or policies alter the natural motivations that influence individual or business decisions, potentially leading to inefficient outcomes.

Revenue

The income generated from normal business operations and before any expenses are deducted.

Excise Tax

A tax imposed on specific goods, services, or activities, such as gasoline, cigarettes, or gambling, usually intended to discourage their use or to raise revenue.