Bus 379 Course Project
March 31, 2013

Task 1 1. National First with an APR of 3.25%(Prime Rate) +6.75%=10%
The ERA=(1+10%/2)^2 – 1= 10.25%
Regions Best 13.17 APR compounded monthly.
The ERA = (1+13.17%/12)^12 – 1= 13.99%

2. I would recommend National First Bank, the ERA with NFB is 10.25% and the ERA with Regions Best is 13.99%. National First Bank is calculated semiannually so it is only twice a year but Regions Best is compounded monthly. The APR with National Best is low even if it is Prime.

3. The loan amount is $6,950,000, interest rate is 8.6% APR over 5 years. To do the calculation we work with (loan amount)*(interest rate)/(years)

N=60
I=0.7167
PV= 6,950,000
Payment =x
The monthly payment for to pay back the loan from Regions Best is $142,926.43.
With AirJet taking out a smaller amount for the loan they can pay back the loan faster but if they do not have enough the company won’t be able to finish the project which could result in a huge lose overall.

Task 2 1. Growth rate = 5%
According to the Dividend Growth Formula
R = (D1 / P0)+g
Dividend yield = 3.10% per http://ycharts.com/companies/NOC/dividend_yield
Dividend per share = Dividend yield * Market price per share
Dividend per share = 0.031 * 70.15
Dividend per share = 2.17
R = (2.17 / 70.15) + 0.05
R = 0.031 + 0.05
R = 0.081
R= 8.1%
The Rate of Return for Northrup Grumman Corporation is 8.1%.

2. Required Rate of Return = 8.10%
Constant Growth Rate in dividends = 1%
Dividend per Share = 2.17
D1 = 1.50 * (1+1%)= $1.52
Current Share Price = $1.52 / (8.10% -1%)=$21.41
Current Share Price = $21.41
Using the Rate of Return from Grumman Corporation the Current Share Price of Jet Air Best should be $21.41.

3. Current Share Price of Preferred Stock = Dividend per share on preferred / Rate of Return
Current Share Price of Preferred