Question

The manager of a manufacturing company knows that they will need a new machine in one of their factories. The new machine will cost them $12,500. The manager has determined that they can afford to pay 15% of the cost of the machine in cash. They can then finance the rest through a credit union. The credit union will charge 1% per year compounded monthly. How much are their monthly payments for 3 years

Answer 1

The company will make monthly payments of $299.71 for three years.

This means a total payments of $10,789.60 after the 36th month with an interest charge of $164.60.

Step-by-step explanation:

a) Data and Calculations:

Cost of new machine = $12,500

Down Payment 15% = 1,875

Amount financed through a credit union = $10,625

Interest rate charged by the credit union = 1% per year compounded monthly.

From an online finance calculator:

Monthly Payment = $299.71

Sum of all periodic payments = $10,789.60

Total Interest = $164.60