C., uloaTior Which the pa Scenario To purchase a new piece of diagnostic imaging

Question

C., uloaTior Which the pa Scenario To purchase a new piece of diagnostic imaging equipment for use in its expanded Cancer Center, Memorial Hospital is considering taking out a $100,000 loan that would require the organization to make an annual payment to the lender at the end of each year for a period of 6 years. If the amount of the annual payment that the hospital would be making at the end of each year is $21,000, what would the interest rate be for Memorial Hospital's loan to finance the new equipment?

Explanation / Answer

Answer :- (Given) Loan amount =100000$, Annual installment = 21000$ , (n) no. Of years = 6years, rate of interest (r) =?

Formula used :-

Annual installment = Loan outstanding /PVAF @r%, n years

= 21000 $ = 100000$/PVAF@ r%, 6 years

= PVAF @r%,6 years = 100000$/21000$

= PVAF@r%,6 years = 4.76 (approx)

Now look in log table 4.76 in 6th year

We can see the 4.767 in 6th year at 7% rate

So, 7% per annum rate would be the interest rate at which loan wowou finance.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.