On December 31, 2020, Pronghorn Company signed a $1,284,300 note to Stellar Bank. The market interest rate at that time was 12%. The stated interest rate on the note was 10%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Pronghorn’s financial situation worsened. On December 31, 2022, Stellar Bank determined that it was probable that the company would pay back only $770,580 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,284,300 loan. Determine the amount of cash Pronghorn received from the loan on December 31, 2020.
On December 31, 2020, Pronghorn Company signed a $1,284,300 note to Stellar Bank. The market interest rate at that time was 12%. The stated interest rate on the note was 10%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Pronghorn’s financial situation worsened. On December 31, 2022, Stellar Bank determined that it was probable that the company would pay back only $770,580 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,284,300 loan.
Determine the amount of cash Pronghorn received from the loan on December 31, 2020. (Round present value factors to 5 decimal places, e.g. 0.52513 and final answer to 0 decimal places, e.g. 5,275.)
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