You are purchasing a new combine from a local dealer and plan on financing the purchase through the dealer's financing subsidiary. The list price is $425,000 and, since you have purchased equipment from the dealer in the past, you are receiving a 5 percent 'repeat business' discount off the list price. You are making a down payment of 14 percent of the final purchase price and you will finance the remaining amount. Your marginal tax rate is 20 percent. The loan terms include:

a contract interest rate of 8.00 percent,

a 7-year loan term,

semi-annual payments, and

an origination fee equal to 3.00 percent of the amount financed.

question 1

What is the final purchase price of the combine before accounting for the origination fee?

Question 2

What is the amount (in dollars) of your down payment?

Question 3

What dollar amount are you financing?

Question 4

What is the dollar amount of the origination fee? This is the total amount, not the per dollar financed amount.

Question 5

Excluding interest charges, what is the dollar amount of your total obligation to the lender on this loan? This is the amount you owe before making a single loan payment or paying the origination fee.

Question 6

Based on the total obligation, what is the dollar amount of your periodic payment? This value is central to determining your cost of capital on this loan. Do not report this value as a negative number when answering this question.

Question 7

What is your after-tax actuarial interest rate on this loan?

Question 8

What is your after-tax annual percentage rate (APR) on this loan?