Problem 1 (16 points): PR Machine Company is considering buying a \"CNC M depart
ID: 2787343 • Letter: P
Question
Problem 1 (16 points): PR Machine Company is considering buying a "CNC M department. The cost of the machine is $62,000. A down payment by the machine tool builder and the rest of the principal will payments. The machine tool builder expects PR Machine Company to and the interest of the unpaid balance with each of the payments. charged an interest of 10% per year: a. develop a loan repayment schedule (12 pts) b. calculate the total amount of interest paid by the time the balance of the loan is zero and the percentage it represents (4 pts) onsidering buying a "CNC Machining Center" for own payment of $20,000 is required the principal will be paid in 3 equal yearly hine Company to pay the principal each of the payments. If the company isExplanation / Answer
EYI = P × r × (1 + r)n /{(1 + r)n - 1 }
EYI= Equal Yearly Installment
P = Principal = $ 62,000 - $ 20,000 = $ 42,000
r = rate of interest = 10 % or 0.1 p.a.
n = 3 periods
EYI = $ 42,000 x 0.1 x (1 + 0.1)3/ {(1 + 0.1)3 -1}
= $ 42,000 x 0.1 x (1.1)3/ {(1.1)3 -1}
= $ 42,000 x 0.1 x 1.331/ (1.331 -1)
= $ 42,000 x 0.1 x 1.331/0.331
= $ 42,000 x 0.1 x 4.021148
= $ 16,888.82
a.
Amortization Schedule:
Year
Beginning Balance(B)
EYI (I)
Interest(r)
Principal(P=I-r)
Ending Balance(E=B-P)
1
$ 42,000.00
$ 16,888.82
$ 4,200.00
$ 12,688.82
$ 29,311.18
2
$ 29,311.18
$ 16,888.82
$ 2,931.12
$ 13,957.70
$ 15,353.48
3
$ 15,353.48
$ 16,888.82
$ 1,535.35
$ 15,353.47
$ 0.0
Totals
$ 86,664.66
$ 50,666.46
$ 8,666.47
$ 42,000
b.Total amount paid = $ 16,888.82 x 3 = $ 50,666.47
Total interest paid = $ 50,666.47 - $ 42,000 = $ 8,666.465
Interest in % = $ 8,666.465/$ 42,000 x 100 = 0.206344 x 100 = 20.63 %
Year
Beginning Balance(B)
EYI (I)
Interest(r)
Principal(P=I-r)
Ending Balance(E=B-P)
1
$ 42,000.00
$ 16,888.82
$ 4,200.00
$ 12,688.82
$ 29,311.18
2
$ 29,311.18
$ 16,888.82
$ 2,931.12
$ 13,957.70
$ 15,353.48
3
$ 15,353.48
$ 16,888.82
$ 1,535.35
$ 15,353.47
$ 0.0
Totals
$ 86,664.66
$ 50,666.46
$ 8,666.47
$ 42,000
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