Answer:
Cody Company
a. The total annual loan payment (including interest and principal) is
= $36,483.86
b. The total interest to be paid in year 4 is:
= $10,515.37
Explanation:
a) Data and Calculations:
Amount of loan to finance asset = $150,000
Interest rate on the financing = 12%
Period of loan = 6 years
From an online financial calculator:
N (# of periods) 6
I/Y (Interest per year) 12
PV (Present Value) 150000
FV (Future Value) 0
Results
PMT = $36,483.86
Sum of all periodic payments $218,903.15
Total Interest $68,903.15
Schedule of Annual Payments and Interests
Period PV Annual PMT Interest FV
1 $150,000.00 $-36,483.86 $18,000.00 $131,516.14
2 $131,516.14 $-36,483.86 $15,781.94 $110,814.22
3 $110,814.22 $-36,483.86 $13,297.71 $87,628.07
4 $87,628.07 $-36,483.86 $10,515.37 $61,659.58
5 $61,659.58 $-36,483.86 $7,399.15 $32,574.87
6 $32,574.87 $-36,483.86 $3,908.98 $0.00
