Question

Don't put dollar sign ($) and comma (,) into the blank and show the final answer only. Don't show any supporting work in the blank.

If you buy a factory for $15835294 and the terms are 11 percent down, the balance to be paid off over 30 years at a 12 percent rate of interest on the unpaid balance, what are the 30 equal annual payments?

Answer 1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

1. Present value of remaining payment = 15,835,294×(1-0.11)

= 14,093,411.66

PV = $14,093,411.66

2. Formula: The present value of an ordinary annuity (PV)

PV = C× [1-(1+r)^-n]/r

PV = Present value (The cummulative amount available at Present)

C= Periodic cash flow.

r =effective interest rate for the period. 12% = 0.12

n = number of periods. 30

$14,093,411.66 = C× [1-(1+0.12)^-30]/0.12

C = $1,749,607.67

30 uniform equal annual payments = $1,749,607.67