1. Equal end-of-year payments of P2,638 each are being made on a P10,000 loan at 10% effective interest per year. a. How many payments are required to repay the entire loan? b. Immediately after the second payment, what lump-sum amount would completely pay off the loan? 2. A contract has been signed to lease a building at P360,000 per year with an annual increase of P3,000 for 10 years. Payments are to be made at the end of each year, starting one year from now. The prevailing interest rate is 7%. What lump-sum paid today would be equivalent to the ten-year lease payment plan?
1. Equal end-of-year payments of P2,638 each are being made on a P10,000 loan at 10% effective interest per year. a. How many payments are required to repay the entire loan? b. Immediately after the second payment, what lump-sum amount would completely pay off the loan? 2. A contract has been signed to lease a building at P360,000 per year with an annual increase of P3,000 for 10 years. Payments are to be made at the end of each year, starting one year from now. The prevailing interest rate is 7%. What lump-sum paid today would be equivalent to the ten-year lease payment plan?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...
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