Question: 1 . Design an appropriate financing program for a farm to purchase an $ 6 0 , 0 0 0 tractor and related equipment. The

1. Design an appropriate financing program for a farm to purchase an $60,000 tractor and related equipment. The machine will be used for 8 years (assume salvage value is zero after the 8th year). The lender requires 5% interest rate and the farmer is to make a 25% down payment. Tell me which type of loan you will choose and why.
a. Calculate the annual payment and the total interest payment.
b. Calculate the annual payment and total interest payment if the lender provides the loan for only 5 years.
c. Explain why you prefer the loan for 8 years instead of 5 years.

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