Problem #6 (3 points) The Lake Meade Manufacturing Company plans to purchase a s

Question

Problem #6 (3 points) The Lake Meade Manufacturing Company plans to purchase a straddle carrier at a cost of $280,000 and will finance it over forty-eight (48) months at 6% per year compounded monthly What is the monthly payment for this financial arrangement? Problem #7 (3 points) Your maintenance costs are anticipated to be $20,000 at the end of year one, and will increase by $1250 each year for the following six years. What present sum of money should be invested now to pay for the required maintenance expenses over the seven-year period. Solve for the present equivalent using a gradient formula assuming an interest rate of eight percent (8%) compounded annually.

Explanation / Answer

Answer #6.

Cost of Carrier = $280,000
Annual Interest Rate = 6%
Monthly Interest Rate = 6%/12 = 0.5%
Period of Finance = 48 months

Monthly Payment = $280,000 / PVA of $1 (0.5%, 48)
Monthly Payment = $280,000 / [(1 - (1 / 1.005)^48) / 0.005]
Monthly Payment = $280,000 / 42.58032
Monthly Payment = $6,575.81

So, monthly payment under this financial agreement is $6,575.81

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