Present value with periodic rates. Sam Hinds, a local dentist, is going to remodel the dental reception area and add two new workstations. He has contacted A-Dec, and the new equipment and cabinetry will cost $20,000. The purchase will be financed with an interest rate of 7% loan over 8 years. What will Sam have to pay for this equipment if the loan calls for quarterly payments (4 per year) and monthly payments (12 per year)? Compare the annual cash outflows of the two payments. Why does the monthly payment plan have less total cash outflow each year?
Present value with periodic rates. Sam Hinds, a local dentist, is going to remodel the dental reception area and add two new workstations. He has contacted A-Dec, and the new equipment and cabinetry will cost $20,000. The purchase will be financed with an interest rate of 7% loan over 8 years. What will Sam have to pay for this equipment if the loan calls for quarterly payments (4 per year) and monthly payments (12 per year)? Compare the annual cash outflows of the two payments. Why does the monthly payment plan have less total cash outflow each year?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Present value with periodic
cash outflow each year?
rates.
Sam Hinds, a local dentist, is going to remodel the dental reception area and add two new workstations. He has contacted A-Dec, and the new equipment and cabinetry will cost
$20,000.
The purchase will be financed with an interest rate of
7%
loan over
8
years. What will Sam have to pay for this equipment if the loan calls for
quarterly
payments
(4
per year) and
monthly
payments
(12
per year)? Compare the annual cash outflows of the two payments. Why does the
monthly
payment plan have less total What will Sam have to pay for this equipment if the loan calls for
quarterly
payments
(4
per year)?$nothing
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