Question

Alden Trucking Company is replacing part of its fleet of trucks by purchasing them under a note agreement with Kenworthy on January 1, 2016. Alden financed $39,169,279, and the note agreement will require $10.07 million in annual payments starting on December 31, 2016 and continuing for a total of four more years (final payment December 31, 2020). Kenworthy will charge Alden Trucking Company the market interest rate of 9% compounded annually. After the first payment was made, the note payable liability on December 31, 2016 is closest to:

A) $29,099,279.

B) $34,134,279.

C) $40,280,000.

D) $32,624,514.

Answer 1

Correct answer---(D) $32,624,514.

Year	Installments (A)	Principal due (B)	Interest Payment (C=B x 9%)	Principal Payment (D=A-C)	Total Due (E=B-D)
2016	$ 10,070,000	$          39,169,279	$              3,525,235	$               6,544,765	$    32,624,514