Question

P5-5 (similar to) 3 Question Help 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 $25.000. The purchase will be financed with an interest rate of 7% loan over 9 vears. What will Sam have to pay for this equipment if the loan calls for semiannual payments (2 per year) and weekly payments (52 per year)? Compare the annual cash outflows of the two payments. Why does the weekly payment plan have less total cash outflow each year? What will Sam have to pay for this equipment if the loan calls for semiannual payments (2 per year)? $ (Round to the nearest cent.) Enter your answer in the answer box and then click Check Answer. 2 parts 2 Pertaining 2 remaining Clear All Check Answer

Answer 1

Calculate the semiannual payment and weekly payment as follows:

B Amount 87 Particulars 88 Semiannual payments 89 Weekly payment $1,895.42 $72.04

Third bit answer:

The weekly payment plan will have lesser cash outflow each year because number of payments per year is more when compared to semiannual plan. Principal repaid early in case of weekly payment.

As more payment are made each year, the (principal) is repaid and thus the interest expense is lower.

Formulas:

87 Particulars 88 Semiannual payments 89 Weekly payment Amount =PMT(7%/2,9*2,-25000) =PMT(7%/52,9*52,-25000)