Exercise 6-11 (Part Level Submission) Kingbird Excavating Inc. is purchasing a b

Question

Exercise 6-11 (Part Level Submission) Kingbird Excavating Inc. is purchasing a bulldozer. The equipment has a price of $97,600. The manufacturer has offered a payment plan that would allow Kingbird to make 10 equal annual payments of $19,447.00, with the first payment due one year after the purchase. Your answer is correct. How much total interest will Kingbird pay on this payment plan? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Total interest 9687 Attempts: 1 of 3 used Kingbird could borrow $97,600 from its bank to finance the purchase at an annual rate of 14%. Click here to view factor tables Should kingbird borrow from the bank or use the manufacturer's payment plan to pay for the equipment (Round answer to 0 decima places, e.g. 796. Manufacturer's rate Attempts: 0 of 3 used

Explanation / Answer

Amount paid each year 19447 Annuity present value facctor fr 10 yrs at 15% 5.01877 Present value of payments made 97600.02 Less: Equipment cost 97600 NPV 0 Hence, the manufacturer interst rate is 15% Hence, Kingbird shall borrow from the bank.

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