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Cullumber Company issues a 12%, 6-year mortgage note on January 1, 2017, to obtain financing for...

Cullumber Company issues a 12%, 6-year mortgage note on January 1, 2017, to obtain financing for new equipment. Land is used as collateral for the note. The terms provide for semiannual installment payments of $49,100. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What are the cash proceeds received from the issuance of the note? (Round answer to 2 decimal places, e.g. 25.25.)

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Answer #1

Total present value of cash payments is the total cash proceeds.

Annual interest rate is 12% but payment is made semiannually so effective interest rate will be 6%.

Period

Payment

PV Factor annuity for $1 @ 6%

1-12.

$ 49,100.00

8.38384

$ 411,646.54

Period

PV factor

1

0.94340

2

0.89000

3

0.83962

4

0.79209

5

0.74726

6

0.70496

7

0.66506

8

0.62741

9

0.59190

10

0.55839

11

0.52679

12

0.49697

8.38384
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