Question

Charlie Corp. is purchasing new equipment with a cash cost of $300,000 for an assembly line. The manufacturer has offered to accept $68,900 payments at the end of each of the next six years. How much interest will Charlie Corp. pay over the term of the loan?

Answer 1

The interest charged = $113,400

Step-by-step explanation:

Data provided:

Cash cost of purchasing equipment = $300,000

Accepted offer

Part payments = $68,900

Duration = 6 years

Now,

The total payment made = Part payment each year × total years

or

The total payment made = $68,900 × 6 = $413,400

Also,

Total payment = Principle amount + Interest charged

Therefore,

$413,400 = $300,000 + Interest charged

or

Interest charged = $413,400 - $300,000

or

The interest charged = $113,400