Question

Calculate the amount of additional capital a business needs to obtain in order to purchase a new piece of

equipment that costs $250,000 if a bank will loan 75% of the price and the business has $20,000 in
available cash.

Answer 1

To purchase the new equipment, the business would need to obtain an additional $42,500 in capital.

Step-by-step explanation:

To calculate the amount of additional capital a business needs to obtain in order to purchase a new piece of equipment that costs $250,000, we need to consider that the bank will loan 75% of the price. The business already has $20,000 in available cash. Therefore, the additional capital needed can be calculated as follows:

Cost of equipment: $250,000

Bank loan: 75% of $250,000 = $187,500

Available cash: $20,000

Additional capital needed = Cost of equipment - Bank loan - Available cash

Additional capital needed = $250,000 - $187,500 - $20,000 = $42,500

In order to purchase the equipment, the business would need to obtain an additional $42,500 in capital.