Final answer:
To calculate the interest paid over the life of the loan, you multiply the annual payment by the number of years and then subtract the cash purchase price of the lathe. The total interest appears to be $14,000, which does not match any of the given answer choices, suggesting an issue with the question or answer options provided.
Step-by-step explanation:
To answer how much interest Grummet Company will pay over the life of the loan for acquiring a new wood lathe, we need to calculate the total amount paid to the manufacturer and subtract the cash purchase price of the lathe.
The company will make four annual payments of $23,500. Multiplying this amount by four gives us the total amount paid over the life of the loan, which is $23,500 x 4 = $94,000. To find the total interest paid, we subtract the cash purchase price of the lathe from the total amount paid: $94,000 - $80,000 = $14,000.
However, there is no option matching $14,000 in the provided answers. It appears there may be either a difference in the calculation assumptions, such as the presence of compound interest, or an error in the question or the provided options. Since the provided information does not support the assumptions necessary for standard loan calculations, and the calculated interest of $14,000 does not match any of the answer options, we cannot confidently provide an option from the given choices. We recommend reviewing the problem parameters or acquiring additional information to ensure accurate results.