Question
Wildhorse Ltd. signed an installment note on January 1, 2020, in settlement of an account payable of $30,500 owed to Mott Ltd. Wildhorse is able
Wildhorse Ltd. signed an installment note on January 1, 2020, in settlement of an account payable of $30,500 owed to Mott Ltd. Wildhorse is able to borrow funds from its bank at 9%, whereas Mott can borrow at the rate of 8%. The note calls for two equal payments of blended principal and interest to be made on December 31, 2020, and 2021. Using (1) factor Table A.4, (2) a financial calculator, or (3) Excel function PV, calculate the amount of the equal installment payments that will be made to Mott Ltd. (Hint: Refer to Chapter 3 for tips on calculating.) (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 2 decimal places, e.g. 5,275.75.
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