Question
In: Finance
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.
Solutions
Expert Solution
Given, payment made each year =62355
Rate of interest =12% i.e cost of debt
Time =20 years
Present value of payments= cost of bulldozer
Hence present value of payments=
=payment made each year * present value of annuity factor at given rate for given time
=62355* present value of annuity factor at 12% for 20 years
= 62355*7.46944
=465757.1572
Hence value of bulldozer =465757.1572
jeff jeffy answered 2 years agoRelated Solutions
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