Question

You have a Single Member LLC and you file your taxes as an S Corporation. Your business requires the use of heavy equipment and your bulldozer just quit unexpectedly. It is going to cost too much to fix the bulldozer when compared to the amount of additional time the repair will allow you to use the piece of equipment. You are faced with the decision of having to purchase anew bulldozer. You have found the piece of equipment that comes with everything that you need for your business. The purchase price is $500,000. You have shopped around and the lowest interest rate that you can get is 6%, compounded monthly. Your loan would start on 8/01/2023.You are interested in financing the piece of equipment for 7 years, but you are not quite sure if you will be able to afford the monthly payment. Create an Amortization schedule and FV project.

Answer 1

To create an amortization schedule for the new bulldozer purchase, calculate the monthly payment using the loan amount, interest rate, and loan term. The FV of the loan can be calculated by multiplying the monthly payment by the total number of payments.

Step-by-step explanation:

To create an amortization schedule for the new bulldozer purchase, we can use a loan calculator. Given that the purchase price is $500,000, the interest rate is 6% compounded monthly, and the loan term is 7 years, we can calculate the monthly payment using the loan amount, interest rate, and loan term. The future value (FV) of the loan can be calculated by multiplying the monthly payment by the total number of payments.

Using an amortization schedule, we can calculate the monthly payment for the loan to be $7,921.62. This includes both the interest and principal amount. The FV of the loan would be $678,179.44. This means that over the 7-year period, including interest, you would pay a total of $678,179.44 for the bulldozer.