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Wesley Excavations has taken on a loan to buy a new bulldozer.The terms of the...

Wesley Excavations has taken on a loan to buy a new bulldozer. The terms of the loan state that they must pay $62,355 per year for the next 20 years. If Wesley's cost of debt is 0.12, how much does the bulldozer cost? You may ignore taxes.

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Expert Solution

Information provided:

Annual payment= $62,355

Time= 20 years

Interest rate= 12%

The question is solved by computing the present value.

Enter the below in a financial calculator to compute the present value:

PMT = 62,355

N= 20

I/Y= 12

Press the CPT key and PV to calculate the present value.

The value obtained is 465,757.16.

Therefore, the bulldozer will cost $465,757.16.

jeff jeffy answered 2 years ago
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