Question

In: Finance

Cooley Landscaping needs to borrow ​$26,000 for a new​ front-end dirt loader. The bank is willing...

Cooley Landscaping needs to borrow ​$26,000 for a new​ front-end dirt loader. The bank is willing to loan the money at 10​% interest for the next 7 years with annual​, semiannual​, quarterly​, or monthly payments. What are the different payments that Cooley Landscaping could choose for these different payment​ plans? What is​ Cooley's payment for the loan at 10​% interest for the next 7 years with annual ​payments?

Solutions

Expert Solution

Annual

Annual rate(M)= yearly rate= 10.00% Annual payment= 5340.54
Year Beginning balance (A) Annual payment Interest = M*A Principal paid Ending balance
1 26000.00 5340.54 2600.00 2740.54 23259.46
2 23259.46 5340.54 2325.95 3014.60 20244.86
3 20244.86 5340.54 2024.49 3316.06 16928.80
4 16928.80 5340.54 1692.88 3647.66 13281.14
5 13281.14 5340.54 1328.11 4012.43 9268.71
6 9268.71 5340.54 926.87 4413.67 4855.04
7 4855.04 5340.54 485.50 4855.04 0.00
Where
Interest paid = Beginning balance * Annual interest rate
Principal = Annual payment – interest paid
Ending balance = beginning balance – principal paid
Beginning balance = previous Year ending balance

semi annual

Semi Annual rate(M)= yearly rate/2= 5.00% Semi Annual payment= 2626.62
Half year Beginning balance (A) Semi Annual payment Interest = M*A Principal paid Ending balance
1 26000.00 2626.62 1300.00 1326.62 24673.38
2 24673.38 2626.62 1233.67 1392.95 23280.42
3 23280.42 2626.62 1164.02 1462.60 21817.82
4 21817.82 2626.62 1090.89 1535.73 20282.09
5 20282.09 2626.62 1014.10 1612.52 18669.57
6 18669.57 2626.62 933.48 1693.14 16976.42
7 16976.42 2626.62 848.82 1777.80 15198.62
8 15198.62 2626.62 759.93 1866.69 13331.93
9 13331.93 2626.62 666.60 1960.03 11371.90
10 11371.90 2626.62 568.60 2058.03 9313.88
11 9313.88 2626.62 465.69 2160.93 7152.95
12 7152.95 2626.62 357.65 2268.98 4883.97
13 4883.97 2626.62 244.20 2382.42 2501.55
14 2501.55 2626.62 125.08 2501.55 0.00
Where
Interest paid = Beginning balance * Annual interest rate
Principal = Annual payment – interest paid
Ending balance = beginning balance – principal paid
Beginning balance = previous Year ending balance

quarterly

Quarterly rate(M)= yearly rate/4= 2.50% Quarterly payment= 1302.29
Quarter Beginning balance (A) Quarterly payment Interest = M*A Principal paid Ending balance
1 26000.00 1302.29 650.00 652.29 25347.71
2 25347.71 1302.29 633.69 668.59 24679.12
3 24679.12 1302.29 616.98 685.31 23993.81
4 23993.81 1302.29 599.85 702.44 23291.37
5 23291.37 1302.29 582.28 720.00 22571.37
6 22571.37 1302.29 564.28 738.00 21833.37
7 21833.37 1302.29 545.83 756.45 21076.92
8 21076.92 1302.29 526.92 775.36 20301.55
9 20301.55 1302.29 507.54 794.75 19506.80
10 19506.80 1302.29 487.67 814.62 18692.19
11 18692.19 1302.29 467.30 834.98 17857.21
12 17857.21 1302.29 446.43 855.86 17001.35
13 17001.35 1302.29 425.03 877.25 16124.10
14 16124.10 1302.29 403.10 899.18 15224.91
15 15224.91 1302.29 380.62 921.66 14303.25
16 14303.25 1302.29 357.58 944.70 13358.55
17 13358.55 1302.29 333.96 968.32 12390.22
18 12390.22 1302.29 309.76 992.53 11397.69
19 11397.69 1302.29 284.94 1017.34 10380.35
20 10380.35 1302.29 259.51 1042.78 9337.57
21 9337.57 1302.29 233.44 1068.85 8268.72
22 8268.72 1302.29 206.72 1095.57 7173.16
23 7173.16 1302.29 179.33 1122.96 6050.20
24 6050.20 1302.29 151.25 1151.03 4899.17
25 4899.17 1302.29 122.48 1179.81 3719.36
26 3719.36 1302.29 92.98 1209.30 2510.06
27 2510.06 1302.29 62.75 1239.53 1270.52
28 1270.52 1302.29 31.76 1270.52 0.00
Where
Interest paid = Beginning balance * Annual interest rate
Principal = Annual payment – interest paid
Ending balance = beginning balance – principal paid
Beginning balance = previous Year ending balance

monthly

Monthly rate(M)= yearly rate/12= 0.83% Monthly payment= 431.63
Month Beginning balance (A) Monthly payment Interest = M*A Principal paid Ending balance
1 26000.00 431.63 216.67 214.96 25785.04
2 25785.04 431.63 214.88 216.76 25568.28
3 25568.28 431.63 213.07 218.56 25349.72
4 25349.72 431.63 211.25 220.38 25129.34
5 25129.34 431.63 209.41 222.22 24907.12
6 24907.12 431.63 207.56 224.07 24683.04
7 24683.04 431.63 205.69 225.94 24457.11
8 24457.11 431.63 203.81 227.82 24229.28

.

.

.

71 5681.36 431.63 47.34 384.29 5297.08
72 5297.08 431.63 44.14 387.49 4909.59
73 4909.59 431.63 40.91 390.72 4518.87
74 4518.87 431.63 37.66 393.97 4124.90
75 4124.90 431.63 34.37 397.26 3727.64
76 3727.64 431.63 31.06 400.57 3327.07
77 3327.07 431.63 27.73 403.91 2923.17
78 2923.17 431.63 24.36 407.27 2515.90
79 2515.90 431.63 20.97 410.66 2105.23
80 2105.23 431.63 17.54 414.09 1691.14
81 1691.14 431.63 14.09 417.54 1273.61
82 1273.61 431.63 10.61 421.02 852.59
83 852.59 431.63 7.10 424.53 428.06
84 428.06 431.63 3.57 428.06 0.00
Where
Interest paid = Beginning balance * Annual interest rate
Principal = Annual payment – interest paid
Ending balance = beginning balance – principal paid
Beginning balance = previous Year ending balance

Related Solutions

Cooley Landscaping needs to borrow ​$25,000 for a new​ front-end dirt loader. The bank is willing...
Cooley Landscaping needs to borrow ​$25,000 for a new​ front-end dirt loader. The bank is willing to loan the money at 10​% interest for the next 5 years with annual​, semiannual​, quarterly​, or monthly payments. What are the different payments that Cooley Landscaping could choose for these different payment​ plans? What is​ Cooley's payment with annual payments? What is​ Cooley's payment with semi-annual payments? What is​ Cooley's payment with quarterly payments? What is​ Cooley's payment with monthly payments?
Cooley's landscaping needs to borrow $28,000 for a new front-end dirt loader. the bank is willing...
Cooley's landscaping needs to borrow $28,000 for a new front-end dirt loader. the bank is willing to loan the money at 8.5% interest for the next 5 years with annual, semiannually, quarterly, or monthly payments. what are the different payments that Cooley landscaping could choose for these different payment plans?
Cooley Landscaping Company borrows $300,000 for a new front-end dirt loader. The bank is willing to...
Cooley Landscaping Company borrows $300,000 for a new front-end dirt loader. The bank is willing to loan the funds at 8.5% APR with QUARTERLY payment at the end of each quarter for the next 10 years. What is the QUARTERLY payment and how much of the first payment is used to pay for the interest?
Your firm buys a new front loader tractor. The initial cost is $210,000. The useful life...
Your firm buys a new front loader tractor. The initial cost is $210,000. The useful life is 15 years. You expect the front loader's net cash flow every year should be $45,000.  If your company's MARR is 6% what is the future worth of the front loader? Give your answer in dollars and include a + or - sign as needed.
Lou wants to set up his own landscaping business and needs to borrow $2500 to buy...
Lou wants to set up his own landscaping business and needs to borrow $2500 to buy equipment. He wants to keep on top of his payments so he would prefer to pay off the loan on a weekly basis. Option A: 2 year term at 3.99% Option B: 1 year term at 3.99% What effect does the term length have on his loan? What should he choose and why? (Answers will vary) Lou wants to set up his own landscaping...
Becca needs to borrow $143,000 to purchase a new home.  The bank has given her two options;...
Becca needs to borrow $143,000 to purchase a new home.  The bank has given her two options; the first is a 20 year loan at 4.35% or the second is a 30 year loan at 4.95%. How much is the payment for each of these loans? 20-year payment______________    30-year payment ______________ What is the total cost of each mortgage? 20-year total cost______________   30-year total cost ______________ How much will Becca save if she chooses the 20 year loan? _______________
Becca needs to borrow $143,000 to purchase a new home.  The bank has given her two options;...
Becca needs to borrow $143,000 to purchase a new home.  The bank has given her two options; the first is a 20 year loan at 4.35% or the second is a 30 year loan at 4.95%. How much is the payment for each of these loans? 20-year payment______________    30-year payment ______________ What is the total cost of each mortgage? 20-year total cost______________   30-year total cost ______________ How much will Becca save if she chooses the 20 year loan? _______________
The Business Development Bank is willing to loan Alysha the $38,000 she needs to start her...
The Business Development Bank is willing to loan Alysha the $38,000 she needs to start her new business. The loan will require monthly payments of $868.51 over 5 years. A. What is the effective monthly rate on this loan? (Round answer to 1 decimal place, e.g. 15.2%. Do not round your intermediate calculations.) B. With monthly compounding, what is the nominal (annual) interest rate on this loan? (Round answer to 1 decimal place, e.g. 15.2%.)
The Business Development Bank is willing to loan Alysha the$31,000 she needs to start her...
The Business Development Bank is willing to loan Alysha the $31,000 she needs to start her new business. The loan will require monthly payments of $767.10 over 5 years.1. What is the effective monthly rate on this loan?(Round answer to 1 decimal place, e.g. 15.2%. Do not round your intermediate calculations.)2. With monthly compounding, what is the nominal (annual) interest rate on this loan? (Round answer to 1 decimal place, e.g. 15.2%.)
The Business Development Bank is willing to loan Alysha the $31,000 she needs to start her...
The Business Development Bank is willing to loan Alysha the $31,000 she needs to start her new business. The loan will require monthly payments of $767.10 over 5 years. 1, What is the effective monthly rate on this loan? (Round answer to 1 decimal place, e.g. 15.2%. Do not round your intermediate calculations.)    2, With monthly compounding, what is the nominal (annual) interest rate on this loan? (Round answer to 1 decimal place, e.g. 15.2%.)
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT