A small business repairs its store. The builders charge them$130,000 which will be paid back...

A small business repairs its store. The builders charge them $130,000 which will be paid back in monthly installments over three years at 6.80% APR. The builders will reduce this rate to 6.30% APR if they pay $2600 up front. By approximately how much will this reduce the monthly loan repayments?

Solutions

Expert Solution

- Loan amount charged by builder = $130,000

It will be paid back in 36 monthly installments with monthly interest rate of 0.5667%(6.80%/12).

Calculating the monthly loan payment of loan amount $130,000:-

So, monthly loan payment is $4002.15

- Building has offered to reduce the Interest rate too 6.30% if upfront payment of $2600 is paid.

Loan amount after upfront payment = $130,000 - $2600 = $127,400

Calculating the Monthly payment after upfront payment:-

New monthly payment = $3893.10

- So, Reduction in monthly loan payment after reduction in interest rate = $4002.15 - $3893.10

= $109.05

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

You own a small business that repairs furnaces and air conditioners. The market is competitive so...

You own a small business that repairs furnaces and air conditioners. The market is competitive so you must charge the same price as all other firms - $50 per house visit. You can take on as many customers as you would like when you charge this price. Your daily production function is given below, where K = the number of vans you have and L = the number of employees you have each day: ?? = ??(??, ??) = 10??2??1/2...

Spratley Ltd is a builders’ merchant. On 1 September the business had, as part of its...

Spratley Ltd is a builders’ merchant. On 1 September the business had, as part of its inventories, 20 tonnes of sand at a cost of £18 per tonne and, therefore, at a total cost of £360. During the first week in September, the business bought the following amounts of sand: Tonnes Cost per tonne £ 2 September 48 20 4 September 15 24 6 September 10 25 On 7 September the business sold 60 tonnes of sand to a local...

Allocation of Package Purchase Price and Depreciation Methods To expand its business, Small Company paid $754,000...

Allocation of Package Purchase Price and Depreciation Methods To expand its business, Small Company paid $754,000 for most of the property, plant, and equipment of a small trucking company that was going out of business. Before agreeing to the price, Small hired a consultant for $6,000 to appraise the assets. The appraised values were as follows: Property Assessed Value Land $120,000 Building 440,000 Trucks 144,000 Equipment 96,000 Total $800,000 Small issued two checks totaling $760,000 to acquire the assets and...

Allocation of Package Purchase Price and Depreciation Methods To expand its business, Small Company paid $554,000...

Allocation of Package Purchase Price and Depreciation Methods To expand its business, Small Company paid $554,000 for most of the property, plant, and equipment of a small trucking company that was going out of business. Before agreeing to the price, Small hired a consultant for $6,000 to appraise the assets. The appraised values were as follows: Property Assessed Value Land $90,000 Building 330,000 Trucks 108,000 Equipment 72,000 Total $600,000 Small issued two checks totaling $560,000 to acquire the assets and...

A company borrows $110000, which will be paid back to the lender in one payment at...

A company borrows $110000, which will be paid back to the lender in one payment at the end of 8 years. The company agrees to pay yearly interest payments at the nominal annual rate of 7% compounded yearly. At the same time the company sets up a sinking fund in order to repay the loan at the end of 8 years. The sinking fund pays interest at an annual nominal interest rate of 11% compounded yearly. Find the total amount...

A company borrows $200000, which will be paid back to the lender in one payment at...

A company borrows $200000, which will be paid back to the lender in one payment at the end of 8 years. The company agrees to pay monthly interest payments at the nominal annual rate of 4% compounded monthly. At the same time the company sets up a sinking fund in order to repay the loan at the end of 8 years. The sinking fund pays interest at an annual nominal interest rate of 13% compounded monthly. Find the total amount...

A company borrows $170000, which will be paid back to the lender in one payment at...

A company borrows $170000, which will be paid back to the lender in one payment at the end of 8 years. The company agrees to pay yearly interest payments at the nominal annual rate of 11% compounded yearly. At the same time the company sets up a sinking fund in order to repay the loan at the end of 8 years. The sinking fund pays interest at an annual nominal interest rate of 4% compounded yearly. Find the total amount...

10. If you are in charge of the working capital management of a small, local business,...

10. If you are in charge of the working capital management of a small, local business, name 4 ratios would you be most concerned about and why?

Sway's Back Store is considering a project which will require the purchase of $1.5 million in...

Sway's Back Store is considering a project which will require the purchase of $1.5 million in new equipment. The equipment will be depreciated straight-line to a book value of $0.5 million over the 5-year life of the project. Annual sales from this project are estimated at $950,000. The variable cost is 40% of the annual sales and there is an annual fixed cost of $100,000. Sway's Back Store will sell the equipment at the end of the project for a...

Back from his dream, Matt begins some strategic planning for starting another store in a small...

Back from his dream, Matt begins some strategic planning for starting another store in a small town that has no computer store and is not inclined to use mail order buying methods. He believes the annual demand in the town will be P = 1800 – 10Q. First, calculate Matt's marginal revenue curve, and then graph both the demand and MR curves. He estimates his marginal cost per computer to be constant at $600. Sketch on the graph the marginal...

Subjects