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Crane Productions borrowed some money from the California Finance Company at a rate of 17.20 percent...

Crane Productions borrowed some money from the California Finance Company at a rate of 17.20 percent for a seven-year period. The loan calls for a payment of $1,200,000 each year beginning today. How much did Crane borrow? (Round factor values to 4 decimal places, e.g. 1.5214 and final answer to nearest whole dollar, e.g. 5,275.)

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Answer #1

Present value of annuity due=(1+interest rate)*Annuity [1-(1+interest rate)^-time period]/interest rate

=1.172*1,200,000[1-(1.172)^-7]/0.172

=1,200,000*4.5706

=$5,484,720.

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