Crazy hours Construction purchased a new loader for $280,000 using a 25 annual e
ID: 1095575 • Letter: C
Question
Crazy hours Construction purchased a new loader for $280,000 using a 25 annual end of year payment plan at 10% interest. At the end of 10 years they decided to refinance the loader with a new company with 15-year loan. They will pay off the balance due for the loader plus a penalty of 2% of the balance due for early payout of the loan. It will also cost them $1000 to originate the new loan. They will finish paying for the loader with the new loan for the remaining 15 years. Use an amortization table to determine the balance due at the end of 10 years and then calculate the payments for the new loan.
Explanation / Answer
Cost of the loader 280000 Interest @10% for 25years=0.10*280000*25 700000 Instalment per year=(280000+700000)/25 39200 Interest @10% for 10 years=0.10*280000*10 280000 Total Outstanding at the end of 10years=280000+280000 560000 Amount Already paid by 10th Year=39200*10 392000 Balance Outstanding at the end of 10th Year=560000-392000 168000 Penalty on the unpaid amount =0.02*168000 3360 Expenses for new loan 1000 Total Loan taken from the new company(168000+3360+1000) 172360