P3.2 M&B Tooling Ltd. is assessing two available options for the purchase of new equipment with a negotiated cash price of $100,000. The manufacturer is willing to accept a down payment of 20% of the purchase price and an instalment note for the balance. The note would require quarterly fixed principal payments (plus interest) starting October 1, 2020, for a period of two years. M&B has a proposal from its bank for an instalment loan for two years that requires a fixed blended monthly payment (including both principal and interest) starting August 1, 2020. The loan would be for 80% of the equipment's purchase price. The current market rate of interest is 8%. Both contracts have an interest rate of 8% b. Calculate the amount of the payments required of M&B under each alternative. Use either a financial calculator or Excel functions in your calculation
P3.2 M&B Tooling Ltd. is assessing two available options for the purchase of new equipment with a negotiated cash price of $100,000. The manufacturer is willing to accept a down payment of 20% of the purchase price and an instalment note for the balance. The note would require quarterly fixed principal payments (plus interest) starting October 1, 2020, for a period of two years. M&B has a proposal from its bank for an instalment loan for two years that requires a fixed blended monthly payment (including both principal and interest) starting August 1, 2020. The loan would be for 80% of the equipment's purchase price. The current market rate of interest is 8%. Both contracts have an interest rate of 8% b. Calculate the amount of the payments required of M&B under each alternative. Use either a financial calculator or Excel functions in your calculation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter9: Operating Activities
Section: Chapter Questions
Problem 18PC
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![P3.2 M&B Tooling Ltd. is assessing two available options for the purchase of new equipment
with a negotiated cash price of $100,000. The manufacturer is willing to accept a down
payment of 20% of the purchase price and an instalment note for the balance. The note would
require quarterly fixed principal payments (plus interest) starting October 1, 2020, for a period
of two years. M&B has a proposal from its bank for an instalment loan for two years that
requires a fixed blended monthly payment (including both principal and interest) starting
August 1, 2020. The loan would be for 80% of the equipment's purchase price. The current
market rate of interest is 8%. Both contracts have an interest rate of 8%
b. Calculate the amount of the payments required of M&B under each alternative. Use either a
financial calculator or Excel functions in your calculation](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1077c75c-8e83-48c0-8d37-9c6b9ffc6d25%2Fd9ef0dee-56f2-4aad-84d1-78de3594ded5%2Frwfcir6_processed.png&w=3840&q=75)
Transcribed Image Text:P3.2 M&B Tooling Ltd. is assessing two available options for the purchase of new equipment
with a negotiated cash price of $100,000. The manufacturer is willing to accept a down
payment of 20% of the purchase price and an instalment note for the balance. The note would
require quarterly fixed principal payments (plus interest) starting October 1, 2020, for a period
of two years. M&B has a proposal from its bank for an instalment loan for two years that
requires a fixed blended monthly payment (including both principal and interest) starting
August 1, 2020. The loan would be for 80% of the equipment's purchase price. The current
market rate of interest is 8%. Both contracts have an interest rate of 8%
b. Calculate the amount of the payments required of M&B under each alternative. Use either a
financial calculator or Excel functions in your calculation
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