Business Deal Structure Analysis

Comprehensive analysis for $2,500,000 acquisition deal

Deal Value: $2,500,000

Payment Structure: Installment Plan

Interest Rate: 7.5% per year

Duration: 5 years

Total Cost to Buyer: $3,243,950

Annual Payment: $648,790

Total Interest: $743,950

NPV (8% discount): $2,590,120

1. Primary Structure Analysis

Cash Flow Impact:

Moderate annual outflow of $648,790

Risk Assessment:

Medium - Interest rate exposure

Financing Requirements:

Annual budgeting needed

Structure	Total Cost	NPV	Risk Level
Installment Plan (Current)	$3,243,950	$2,590,120	Medium
Lump Sum Payment	$2,500,000	$2,500,000	Low
Balloon Payment	$3,156,250	$2,420,500	High

Advantages:

Disadvantages:

Annual Interest Deduction: ~$148,790

Tax Shield (25% rate): $37,198

Effective Annual Cost: $611,592

Lump Sum Payment - Lowest total cost and eliminates interest risk.

Requires significant upfront capital but saves $743,950 in interest.

Installment Plan - Generates additional $743,950 in interest income.

Provides steady cash flow but carries collection risk.

Year	Principal	Interest	Total Payment	Balance
1	$461,290	$187,500	$648,790	$2,038,710
2	$496,687	$152,903	$648,790	$1,542,023
3	$534,439	$115,652	$648,790	$1,007,584
4	$575,022	$75,569	$648,790	$432,562
5	$432,562	$32,442	$465,004	$0