Question

1. The Chicago Hope Hospital purchased a MRI machine for 5 million dollars, using a 6-year loan at 8% interest.
2. 1. What will be the annual payment for the machine?

b. The price of the MRI machine (5 million) is rising at a fixed rate of 2% each year. How much would it cost to replace the MRI machine 5 years from now?

Please include the input used in a financial calculator if it is needed.

Answer 1

Given parameters: Set

Loan Amount (P) = $5,000,000

Loan period(N) = 6 years

Rate of interest(i) = 8%

Annual Payment(PMT) = ?

Press CPT+PMT , PMT = $1,081,576.93

Note: in financial calculator, P is used with - sign

Alternatively using EMI formula

EMI = [p x i x (1+i)^n]/[(1+i)^n-1]

EMI = (5000000 x 0.08 x (1+0.08)^6)/((1+0.08)^6-1)

EMI = 5000000 x 0.216315386 = $1,081,576.93

MRI Machine after 5 years, using future value formula

FV = PV x (1+i)^n

FV = 5000000 x (1+.02)^5 => $5,520,404

Using F.CaL

PV = 5000000, I = 0.02, n = 5, press CPT + FV , FV = 5520404