Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You have to make a major piece of equipment purchase today but there is no money to cover it right now. The vendor can provide

You have to make a major piece of equipment purchase today but there is no money to cover it right now. The vendor can provide you with vendor-finance for this project and has determined that the price he can sell it to you right now is $20,000 today, including a financing fee of 1% and delivery and set up charge of $2,000. Assume a 4% yearly simple interest rate. Your bank can also provide you with a 30K loan now @5% simple yearly interest over 4 years with a commitment fee of 0.5%. What option is better? How much do you need to pay each year over the next 4 years to be equal to 20K now, assuming 4% compounded interest?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Challenging Global Finance

Authors: Elizabeth Friesen

2012th Edition

0230348793, 978-0230348790

More Books

Students also viewed these Finance questions

Question

4. What are the four suggested types of consciousness?

Answered: 1 week ago