Question

Ace Manufacturing is building a new Platinum Level LEED certified facility that will cost $44M. Ace will borrow $40M from First National Bank and pay the remainder immediately as a down payment. Ace will pay 7% interest but will make no payments for 4 years, at which time the entire amount will be due.

Answer 1

Answer:

Ace will repay a total of $52.4 million to bank.

Explanation:

given data

Cost of building new facility = $44 million

Amount borrowed (P) = $40 million

Time period (n) = 4 years

Interest rate (r) = 7% or 0.07

solution

we get here amount to be repaid after 4 years that is express as

amount = P × $(1+r)^{t}$   ......................1

put here value and we get

amount = $40 million  × $(1+0.07)^{4}$  

amount = $40 million × 1.31

amount = $52.4 million

so Ace will repay a total of $52.4 million to bank.