Present value with periodic
rates.
Sam Hinds, a local dentist, is going to remodel the dental reception area and add two new workstations. He has contacted A-Dec, and the new equipment and cabinetry will cost
What will Sam have to pay for this equipment if the loan calls for
quarterlyquarterly
payments
(44
per year)?
$15 comma 00015,000.
The purchase will be financed with an interest rate of
8.58.5%
loan over
77
years. What will Sam have to pay for this equipment if the loan calls for
quarterlyquarterly
payments
(44
per year) and
weeklyweekly
payments
(5252
per year)? Compare the annual cash outflows of the two payments. Why does the
weeklyweekly
payment plan have less total cash outflow each year?
QUARTERLY PAYMENTS | ||||||||||
Pv | Cost of new equipment | $15,000 | ||||||||
Rate | Quarterly interest rate=(8.5/4)% | 2.13% | ||||||||
Nper | Number of payments=7*4 | 28 | ||||||||
PMT | Quarterly Payment | $716.31 | (Using PMT function with Rate=2.13%, Nper=28,Pv=-15000) | |||||||
WEEKLY PAYMENTS | ||||||||||
Pv | Cost of new equipment | $15,000 | ||||||||
Rate | Weekly interest rate=(8.5/52)% | 0.16% | ||||||||
Nper | Number of payments=7*52 | 364 | ||||||||
PMT | Quarterly Payment | $54.71 | (Using PMT function with Rate=0.16%, Nper=364,Pv=-15000) | |||||||
Annual Cash Flow for quarterly payments | $2,865.24 | (716.31*4) | ||||||||
Annual Cash Flow for weekly payments | $2,844.91 | (54.71*52) | ||||||||
Weekly payment has lower Annual Cash Flow, because payments are made earlier than quarterly payments | ||||||||||
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Present value with periodic rates. Sam Hinds, a local dentist, is going to remodel the dental...
Present value with periodic rates. Sam Hinds, a local dentist, is going to remodel the dental reception area and add two new workstations. He has contacted A-Dec, and the new equipment and cabinetry will cost $20,000.00 The purchase will be financed with an interest rate of 7.57 % loan over 7 years. A )What will Sam have to pay for this equipment if the loan calls for semiannual payments (2 per year) B) What will Sam have to pay for...
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