While I was running my plastics recycling business, I needed to raise $500,000 forsome immediate upgrades. Since this is new to me and my credit rating was notstellar at that point, I decided to approach a local venture capitalist than a localbank. I offered him to pay $100,000 per year for 10 years starting one year after Ireceived the money. I soon realized that the venture capitalists normally do notuse their money and they make deals with the local banks. Since his credit ratingsare excellent, he persuaded the bank to loan him $300,000 for which he will pay$50,000 per year for 10 years starting one year from the issuance of the loan. Theventure capitalist used $200,000 of his money to help me with the $500,000 loan.Even though this is considered a small transaction, there are many decisionsmade during this process. The venture capitalist normally gets 18% return on hisinvestment. The banks are very happy to get 10% on their loans which areconsidered risky. I needed the money and I do not have many alternatives.Assume that I fulfilled my obligation and paid the money I promised and did notdeclare bankruptcy. Did the venture capitalist made the right decision? What ishis rate of return? Did the bank make the right decision? What is the bank’s rateof return? Use the Net Present Value calculations to answer these questions.Should I have negotiated for 9 years of $100,000 per year payments instead of 10years.