Question

A manufacturer of towers, rotators, and antennas is seeking to capture the high-end market in altazimuth and elevation rotators for use with large six-meter earth-moon-earth (EME) stacked antenna arrays. The company takes out a $40,000 loan for development of the rotator and will pay it back in 4 equal yearly payments; however, the 1st payment will not occur until the end of year 3. Interest is 14% per year.

Determine how much for each payment is interest and how much is principal. (Note: A tabular solution should be used).

Answer 1

As the first payment will begin at the end of 4th year.

We need to find the value of loan at the end of 3rd year for this we will calculate the Future value of the loan

FV = $40,000*(1.14^3) = $59,261.76

Now we will use a BA 2 plus Financial calculator to find the annual payment on this loan-

N(number of annual payments) =4

PV= $59,261.76

I/Y = 14%

FV = 0

CMPT PMT

Annual payment= $20,338.9195

The following table will provide the breakup of principal and interest components

Years	Principal at the beginning	Annual Payment	Interest Payment	Principal Repaid	Principal at the end
4	59261.76	20338.92	8296.646	12042.27	47219.49
5	47219.49	20338.92	6610.728	13728.19	33491.3
6	33491.3	20338.92	4688.781	15650.14	17841.16
7	17841.16	20338.92	2497.762	17841.16	0E+00