T/F please explain clearly) If your company accountant is asked to amortize a on

Question

T/F please explain clearly) If your company accountant is asked to amortize a one-time expense of 1 million dollars by converting it into a cash flow stream of 10 annual uniform payments to be made over a 10 year horizon at an annual interest rate of 5%, then the size of the payments would likely be less than $100,000. T/F please explain clearly) If your company accountant is asked to amortize a one-time expense of 1 million dollars by converting it into a cash flow stream of 10 annual uniform payments to be made over a 10 year horizon at an annual interest rate of 5%, then the size of the payments would likely be less than $100,000.

Explanation / Answer

This statement is False. If 1millions dollars are to be repaid with unfirorm installments at an annual rate of 5%. Then, this means that the total payment will be higher than 1 million as the company is also required to pay the interest rate on this amount. So, the annual payment will be more than $100,000.

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