Shin Company Has a Loan Agreement That Provides It with Cash

question 168

Short Answer

Shin Company has a loan agreement that provides it with cash today.The company must repay this loan in four years with $25,000.Shin agrees to a 6% interest rate.The present value factor for four periods,6%,is 0.7921.What is the amount of cash that Shin Company receives today?

---

Definitions:

Current Assets

Assets likely to be converted into cash, sold, or consumed within one year or a business cycle, such as cash, inventory, and receivables.

Cash Equivalents

Investments of a short duration that are highly liquid, easily converted into precise cash amounts, and carry a minimal risk of fluctuating in value.

Trading Securities

Financial assets bought and sold for short-term profit, often including stocks and bonds.

Fair Market Value

The price that property would sell for on the open market between an informed and willing buyer and seller.