Windsor Tool Inc. has a $500,000 loan for a new EDM machine to be used in the tool/die production. The interest rate for this loan is 6% compounded annually. The finance manager decides that the company will make $40,000 payment each year, starting the end of the first year. By calculation, it will take the company N years to pay back the loan. Notice that the payments for Year1 to Year(N-1) will be $40,000 as planned.  The last payment at the end of Year-N will be smaller than $40,000. First, calculate the value for N=? (years) Second, calculate the last payment for Year(N)=?   Notice that this is a Multi-Answer question, you have to pick one for the number of years and pick one for the last payment amount.     N=22 Years     N=24 Years     N=26 Years     N=28 Years     Payment for last Year = $31,905.     Payment for last Year = $16,794.     Payment for last Year = $10,540.     Payment for last Year = $36,555

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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Windsor Tool Inc. has a $500,000 loan for a new EDM machine to be used in the tool/die production. The interest rate for this loan is 6% compounded annually.

The finance manager decides that the company will make $40,000 payment each year, starting the end of the first year. By calculation, it will take the company years to pay back the loan. Notice that the payments for Year1 to Year(N-1) will be $40,000 as planned.  The last payment at the end of Year-N will be smaller than $40,000.

First, calculate the value for N=? (years)

Second, calculate the last payment for Year(N)=?

 

Notice that this is a Multi-Answer question, you have to pick one for the number of years and pick one for the last payment amount.

   

N=22 Years

   

N=24 Years

   

N=26 Years

   

N=28 Years

   

Payment for last Year = $31,905.

   

Payment for last Year = $16,794.

   

Payment for last Year = $10,540.

   

Payment for last Year = $36,555.

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