Question

A Xerox DocuColor photocopier costing $43,000is paid off in 60 monthly installments at8.6​% APR. After three years the company wishes to sell the photocopier. What is the minimum price for which they can sell the copier so that they can cover the cost of the balance remaining on the​ loan?

A. $27,208

B. $23,321

C. $15,547

D. $19,434

Answer 1

Answer is D.

1. Calculate the EMI

Price of the Printer, P = $43,000

Term, n = 60 months

Monthly Interest Rate, r = 8.6%/12 = 0.716666667 % = .007167

EMI, E = P * r * (1 + r)ⁿ /((1 + r)ⁿ - 1) = 43000*0. 007167 *(1 + 0. 007167)⁶⁰/((1 + 0. 007167)⁶⁰ - 1) = $884.28 pm

1. Present Value of EMIs for remaining term at the time of sale:

r = .007167

n = 60 – 3 * 12 = 24

PV = 884.28 * [ {1 – (1 + .007167)^-24 } / 0.007167 ] = $19,434.22

So, answer is D, $19,434 is the price on which the copier to be sold to cover the cost of upcoming EMIs.