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3) Suppose you wish to start up a new business that specializes in the latest impossible...

3) Suppose you wish to start up a new business that specializes in the latest impossible meat trends. To produce and market your product, you need to borrow $100,000. Because it strikes you as unlikely this particular fad will be long-lived, you propose to pay off the loan quickly by making five equal annual payments. If the interest rate is 18%, what will the annual payment amount be?

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Answer #1

Annual Payment = Loan / PVAF(r%, n)

= $ 100,000 / PVAF (18%, 5)

= $ 100,000 / 3.1272

= $ 31,977.78

Annual Payment is $ 31,977.78

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