Sam Jones has an engineering firm. He wants to build a new headquarters building. The building will cost $1,500,000. He will put down $450,000 and have a bank finance the remainder at prime plus 2 percent. The prime lending rate is currently 8.5 percent. Sam will withdraw the money for the down payment from his mutual fund account where he has earned 13 percent for the last ten years. What percentage of the building is being equity financed?

Question

Quizplus · Accepted Answer

The percentage of the building being equity financed is calculated by dividing the down payment by the total cost of the building. So, $450,000 (down payment) / $1,500,000 (total cost) = 0.3 or 30%.

Sam Jones Has an Engineering Firm