John is looking to finance a $50,000 Backhoe Loader to be used in pipeline construction. Hed like
Question:
John is looking to finance a $50,000 Backhoe Loader to be used in pipeline construction. He’d like to get financing from the bank for monthly payments for an annual interest rate of 10%, compounded monthly with a term of 5years.
a) Find the corresponding monthly interest rate.
b) Construct a table for the principal, the interest, the repayment and the total
payment for each month.
c) Graph the columns concerning the interest and the repayment data.
The bank now offers John a two-year grace period, which means that the first payment
will be made two years after the Backhoe Loader is bought. The term stays 5 years in total, meaning he will repay the principle over 3
years.
d) Construct a table for the principal, the interest, the repayment and the total
payment for each month and Should John take the offer?
Corporate Finance A Focused Approach
ISBN: 978-1305637108
6th edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham