Question

This is an extra credit problem. It is optional. The XYZ Company loaned some money to...

This is an extra credit problem. It is optional.

The XYZ Company loaned some money to one of its vendors so the vendor could upgrade its supply chain. In return, the vendor has agreed to pay XYZ $44,658 a year, with the first payment occurring at the end of year 10.The vendor will make a total of 13 payments to XYZ (one per year). What is the annual worth of this loan? Use a MARR of 7% to make the calculation.

Hint: Count the years carefully. Calculate the annual worth for the entire cash flow (from year 0 to the year of the last payment).

Enter your answer as follows: 12345

Round your answer. Do not use a dollar sign ("$"), any commas (","), or a decimal point (".").

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Homework Answers

Answer #1

Agreed annual payment = 44658

Payment will start from EOY 10 for a total of 13 payment.

It means the first payment will be on EOY10 and it will continue till EOY22 for 13 years. ( EOY10 to EOY22 = 13 years)

Therefore, the total number of years for which AW is to be calculated is 22 years.

MARR = 7%

Step 1-Calculate the PW

PW = 44658 (P/A, 7%, 13) (P/F, 7%, 9)

PW = 44658 (8.35765)(0.54393)

PW = 203014

Step 2-Calculate Annual Worth

AW = PW (A/P, 7%, 22)

AW = 203014.22 (0.09041)

AW = 18354.5

The annual worth is 18355 (rounded off).

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