Enterprise: Strand 1 Section B: Long Questions


8. Raazi is a doctor who just returned to Ireland after living in New York for the last two years. He is eager to get on to the property ladder. He has decided to buy a house in Kildare and commute to Dublin to the hospital in which he works. He also needs to buy a car as he is far away from the local train and bus station.


(i) Apart from savings, state and explain a suitable source of finance that Raazi could use to buy his new house. Give one reason for your answer.


Source of finance: Explanation:


Reason: (ii) Identify one risk this choice of finance will have on Raazi.


(iii) State and explain a suitable source of finance that Raazi could use to purchase his new car and give one reason for your answer.


Source of finance: Explanation:


Reason:


9. To expand into the eurozone market, IOF Ltd will need an extension to the existing factory costing €400,000. New delivery vans at a cost of €60,000 will also be required.


One of the directors saw the following advertisement online for medium-term loans: (i)


WE CAN FINANCE U Ltd


Capital repayments are spread evenly over the period of the loan (e.g. a four- year loan of €60,000 requires a yearly repyment of capital of €15,000)


Interest 9% APR Collateral required


Other than loans, explain two suitable types of finance that IOF Ltd could use to finance the building of the extension costing €400,000.


(ii) Explain the term ‘collateral’.


(iii) IOF Ltd decided to apply for a four-year loan of €60,000 from WE CAN FINANCE U Ltd to purchase the delivery vans.


Calculate the total amount of interest that IOF Ltd will pay over the four years.


86


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