Question

Sunland Tooling Ltd. is assessing two available options for the purchase of new equipment with a negotiated cash price of $130,000. The manufacturer is willing to accept a down payment of 20% of the purchase price and an instalment note for the balance. The note would require quarterly fixed principal payments (plus interest) starting October 1, 2020, for a period of two years. Sunland has a proposal from its bank for an instalment loan for two years that requires a fixed blended monthly payment (including both principal and interest) starting August 1, 2020. The loan would be for 80% of the equipment’s purchase price. The current market rate of interest is 6%. Both contracts have an interest rate of 6%.

a.) Calculate the amount of the payments required of Sunland under each alternative. (Round answers to 2 decimal places)

Quarterly fixed principal + interest payments option with manufacturer:
Total Amount of payments: $__________

b.) Fixed blended monthly instalment note with the bank including principal and interest: (Round answers to 2 decimal places)

Total Amount of payments: $__________

Answer 1

Pls find the below calculations for both options.

Monthly fixed instalment payments Loan amount Principal amount Fixed install ment Interest amount 1 104,000.00 4,089.34 4,609.34 520.00 99,910.66 4,109.79 4,609.34 4,609.34 499.55 95,800.87 4,130.34 4,150.99 4,171.74 479.00 91,670.54 4,609.34 458.35 87,519.55 4,609.34 437.60 83,347.81 4,192.60 4,609.34 416.74 79,155.21 74,941.64 4,213.56 4,609.34 395.78 8. 4,234.63 4,609.34 374.71 6. 70,707.01 4,255.80 4,609.34 353.54 10 66.451.21 62,174.12 4,277.08 4,609.34 4,609.34 332.26 11 4,298.47 310.87 12 57,875.65 4,319.96 4,609.34 289.38 13 53,555.69 4,341.56 4,609.34 267.78 49,214.13 14 4,363.27 4,609.34 246.07 15 44,850.86 4,385.09 4,407.01 4,609.34 224.25 16 40,465.77 4,609.34 4,609.34 202.33 17 36,058.76 4,429.05 180.29 18 31,629.72 4,451.19 4,609.34 4,609.34 158.15 19 27,178.53 4,473.45 135.89 20 22,705.08 4,495.81 4,609.34 4,609.34 4,609.34 4,609.34 4,609.34 110624.16 113.53 18,209.26 21 4,518.29 4,540.89 4,563.59 4,586.41 TOTAL payment 91.05 13,690.97 22 68.45 9,150.09 23 45.75 24 4,586.50 22.93 123 5

Quarterly fixed prinicipal and interest payments Loan amount Fixed install ment Balance payment EMI Interest amount 104,000 13,000 91,000 15,080 2,080 2. 91,000 13,000 78,000 14,820 1,820 78,000 13,000 65,000 14,560 1,560 4 65,000 13,000 52,000 14,300 1,300 52,000 13,000 39,000 14,040 1,040 39,000 13,000 26,000 13,780 780 26,000 13,000 13,000 13,520 520 13,000 13,000 260 13,260 TOTAL payment 113360