1. What’s the effective annual rate (EAR) if the buyer does not take the cash discount?
a. 15.12%.
b. 18.36%.
c. 10.12%.
d. 20.24%.
2. Last year, Plastics Inc. paid cash to purchase land located besides its factory plant at a price of $1.75 million. Today, the land has a market value of $1.90 million. The company is now considering building a new warehouse on that site. The constuction cost of the warehouse is estimated at $2.15 million, $650,000 worth of grading, draining, utility work, and paving will be required. What is the initial cash flow of tis project?