(b) The company is considering purchasing a new delivery truck for $1,200,000. The intention is to obtain a 5-year loan from their bank, at an interest rate of 9% per annum. Annual payments are expected to be made on the loan. Required: i. Calculate DEVCON Industries' annual payment on this loan. ii. Prepare the 5-year Amortization Schedule for this loan, clearly showing the interest and principal payment annually.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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(b) The company is considering purchasing a new delivery truck for
$1,200,000. The intention is to obtain a 5-year loan from their
bank, at an interest rate of 9% per annum. Annual payments are
expected to be made on the loan.
Required:
i. Calculate DEVCON Industries' annual payment on this loan.
ii. Prepare the 5-year Amortization Schedule for this loan,
clearly showing the interest and principal payment
annually.
Transcribed Image Text:(b) The company is considering purchasing a new delivery truck for $1,200,000. The intention is to obtain a 5-year loan from their bank, at an interest rate of 9% per annum. Annual payments are expected to be made on the loan. Required: i. Calculate DEVCON Industries' annual payment on this loan. ii. Prepare the 5-year Amortization Schedule for this loan, clearly showing the interest and principal payment annually.
DEVCON INDUSTRIES LIMITED
Income Statement
For the years ended Dec. 31, 2018 and
2019
2018
2019
so00's
s000's
Sales
900000
1125000
Cost of Goods Sold
300000
306600
Gross Profit
600000
818400
Selling and Administrative Expenses
150000
156000
Depreciation Expense
54000
57000
Advertising Expenses
18000
21000
Earnings Before Interest and Taxes
378000
584400
Interest Expense
3000
3000
Taxable Income
375000
581400
Taxation (35%)
131250
203490
Net Income
243750
377910
Dividends (40%)
97500
151164
Addition to Retained Earnings
146250
226746
Additional Information
Share Price
21
27.3
Ordinary Shares Outstanding
120000000
144000000
DEVCON INDUSTRIES
LIMITED
Statement of Financial
Position
As at Dec. 31, 2018 and 2019
ASSETS
2018
2019
LIABILITIES & EQUITY
2018
2019
Current Assets
s00's
s000's
Current Liabilities
so00's
So00's
Inventories
264000
276000
Accounts Payables
Notes Payables
138000
114000
Accounts Receivables
294000
330000
150900
132654
Cash and Equivalents
210900
270000
288900
246654
768900
876000
Non-current Liabilities
120000
90000
Total Liabilities
408900
336654
Net Fixed Assets
630600
690000
Equity
Common Stock
264000
276000
Retained Earnings
726600
953346
Total Equity
990600
1229346
Total Assets
1399500
1566000
Total Liabilities & Equity
1399500
1566000
Transcribed Image Text:DEVCON INDUSTRIES LIMITED Income Statement For the years ended Dec. 31, 2018 and 2019 2018 2019 so00's s000's Sales 900000 1125000 Cost of Goods Sold 300000 306600 Gross Profit 600000 818400 Selling and Administrative Expenses 150000 156000 Depreciation Expense 54000 57000 Advertising Expenses 18000 21000 Earnings Before Interest and Taxes 378000 584400 Interest Expense 3000 3000 Taxable Income 375000 581400 Taxation (35%) 131250 203490 Net Income 243750 377910 Dividends (40%) 97500 151164 Addition to Retained Earnings 146250 226746 Additional Information Share Price 21 27.3 Ordinary Shares Outstanding 120000000 144000000 DEVCON INDUSTRIES LIMITED Statement of Financial Position As at Dec. 31, 2018 and 2019 ASSETS 2018 2019 LIABILITIES & EQUITY 2018 2019 Current Assets s00's s000's Current Liabilities so00's So00's Inventories 264000 276000 Accounts Payables Notes Payables 138000 114000 Accounts Receivables 294000 330000 150900 132654 Cash and Equivalents 210900 270000 288900 246654 768900 876000 Non-current Liabilities 120000 90000 Total Liabilities 408900 336654 Net Fixed Assets 630600 690000 Equity Common Stock 264000 276000 Retained Earnings 726600 953346 Total Equity 990600 1229346 Total Assets 1399500 1566000 Total Liabilities & Equity 1399500 1566000
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