Exercise 6-11 Pearl Excavating Inc. is purchasing a bulldozer. The equipment has
ID: 2517932 • Letter: E
Question
Exercise 6-11 Pearl Excavating Inc. is purchasing a bulldozer. The equipment has a price of $107,700. The manufacturer has offered a payment plan that would allow Pearl to make 15 equal annual payments of $14,977.33, with the first payment due one year after the purchase How much total interest will Pearl 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 s Pearl could borrow $107,700 from its bank to finance the purchase at an annual rate of 10%. Click here to view factor tables Should Pearl borrow from the bank or use the manufacturer's payment plan to pay for the equipment? (Round answer to O decimal places, e.g. 7% Manufacturer's rate Borrow from the Bank Use Manufacturer's Payment Plan w Work for this question: Open Show WorkExplanation / Answer
(a) The Amount of total interest will Pear pay on this payment plan = $1,16,960
Total Amount paid including Interest = $14977.33 x 15 = $2,24,660
Therefore, Interest Pay = $2,24,660 - $1,07,700 = $1,16,960
(b) Pearl should use the manufactures payment plan because its $2,25,224 difference
Future Value = $1,07,700 x (1+0.10)15
= $4,49,884
Amount Difference = $4,49,884 - $1,07,700 - $1,16,960 = $2,25,224
Pearl should use the manufactures payment plan because its $2,25,224 difference