Answer:
a. $402,264
b. Working for each year the loan balance that remains outstanding, the interest payment on the loan, and the reduction in the loan balance is made in an MS Excel file which attached with this answer. Please find it.
Explanation:
a.
Present value of these payments can be calcullated by following formula
P = r ( PV ) / 1 - ( 1 + r )^-n
P = payment per year = $70,000
r = rate per period = 8%
n = number years = 8 years
PV = present value of all payments = ?
$70,000 = 8% x PV / 1 - ( 1 + 8% )^-8
$70,000 = 0.08 x PV / 1 - ( 1.08 )^-8
$70,000 = 0.08 x PV / 0.45973
$70,000 x 0.45973 = 0.08 x PV
$32,181 = 0.08 x PV
PV = $32,181 / 0.08
PV = 402,263.75
