Question

You get a $60,000 loan for a new dump truck. With the truck, you can generate $500 more business each week at 80% margin. Your interest rate on the loan is 8. 6%. Does the additional margin generated cover the interest payments?

Answer 1

Assuming your interest rate on the loan is 8. 6%. The additional margin generated will cover the interest payments.

Additional margin

Let determine the weekly interest

Weekly interest= 8.6% /12 x 60,000

Weekly interest= $99.23

Let calculate the amount left since the business generates $500 at a margin of 80

Amount left= 500 x 80%

Amount left= $400

Based on the above calculation we can see that the amount of $400 is sufficient enough to cover the $99.23 payments.

Inconclusion  the additional margin generated cover the interest payments.

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