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Smith Inc. purchased a piece of equipment for $850,000 on March 1, 2019 paying $80,000 in...

  1. Smith Inc. purchased a piece of equipment for $850,000 on March 1, 2019 paying $80,000 in down payment and signing a note for the rest of the amount. Smith has agreed to make twenty equal quarterly payments for five years beginning June 1, 2019. The interest rate on this loan is 10%. Assume Smith refinances the carrying value of the loan on September 1, 2022 after the payment on that date has been made. The new interest rate is 8%. What will be the size of new quarterly payments?
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Answer #1
purchase price 850000
`=-downpayment 80000
balance amount 770000
present quarterly installment
pvaf(2.5%,20) 15.589
`770000*15.589 49393
payment schedule @10% the quarterly intrest is 2.5%
date (mm-dd-yyyy) opening interest payment closing
03-01-2019 770000 0 0 770000
06-01-2019 770000 19250 49393 739857
09-01-2019 739857 18496.43 49393 708960.4
12-01-2019 708960.4 17724.01 49393 677291.4
03-01-2020 677291.4 16932.29 49393 644830.7
06-01-2020 644830.7 16120.77 49393 611558.5
09-01-2020 611558.5 15288.96 49393 577454.5
12-01-2020 577454.5 14436.36 49393 542497.8
03-01-2021 542497.8 13562.45 49393 506667.3
06-01-2021 506667.3 12666.68 49393 469940.9
09-01-2021 469940.9 11748.52 49393 432296.5
12-01-2021 432296.5 10807.41 49393 393710.9
03-01-2022 393710.9 9842.772 49393 354160.6
06-01-2022 354160.6 8854.016 49393 313621.7
09-01-2022 313621.7 7840.542 49393 272069.2
closing on sept 2022 is 272069
if refinanced at 8%,the quarterly intrest would be 2%
balance no ofinstallments is 6
pvaf(2%,6) 5.60143
`=272069/5.60143 48,571
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