Question

1. Ross Machine Company in Smithville, Tennessee is considering buying a "CNC Machining Center" for its machining department. The cost of the machine is $50,000. A down payment of $10,000 is required by the machine tool builder and the loan balance will be paid in 5 equal yearly payments. The machine tool builder expects Ross Machine Company to pay the interest on the unpaid balance with each of the payments. If the machine builder charges an interest of 15% per year, develop a loan repayment schedule for this loan.

Answer 1

The cost of machine =50000

Down payment made = 10000

n=5 years

i=15%

Calculating PMT:

Total cost	50000
Down Payment	10000
Amount of loan	40000
interest rate	15%
time (yrs)	5
PMT	11,932.62

loan repayment schedule:

Year	Beginning balance	Total payment	Interest paid	Principal paid	Ending balance
1	40000	$11,932.62	$6,000.00	$5,932.62	$34,067.38
2	$34,067.38	$11,932.62	$5,110.11	$6,822.52	$27,244.86
3	$27,244.86	$11,932.62	$4,086.73	$7,845.89	$19,398.97
4	$19,398.97	$11,932.62	$2,909.85	$9,022.78	$10,376.19
5	$10,376.19	$11,932.62	$1,556.43	$10,376.19	($0.00)