You are required to purchase one plot costing of Rs. 2800000 and the owner make a payment plan for five years that includes following: Down Payment 500000 Monthly Payment 20000 Bi-Annual Payment 70000 Possession Payment 400000 Required to find how much amount as per today if you buy this plan and market rate of interest is 10%…….?

You are required to purchase one plot costing of Rs. 2800000 and the owner make a payment plan for five years that includes following: Down Payment 500000 Monthly Payment 20000 Bi-Annual Payment 70000 Possession Payment 400000 Required to find how much amount as per today if you buy this plan and market rate of interest is 10%…….?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 9EB: If you invest $15,000 today, how much will you have in (for further instructions on future value in...

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

You are required to purchase one plot costing of Rs. 2800000 and the owner make a payment plan for five years that includes following:
1. Down Payment 500000
2. Monthly Payment 20000
3. Bi-Annual Payment 70000
4. Possession Payment 400000

Required to find how much amount as per today if you buy this plan and market rate of interest is 10%…….?

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Introduction

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Calculating present value of monthly payments:

VIEW

Calculating present value of bi-annually payments:

VIEW

Calculating present value of possession payment:

VIEW

Calculating present value of entire plant at today:

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Conclusion

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