Green Industries purchased a machine from Cyan Corporation on October 1, 2021. In payment for the $146,000 purchase, Green issued a one-year installment note to be paid in equal monthly payments at the end of each month. The payments include interest at the rate of 18%. Monthly installment payments are closest to: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
a. $13,385.
b. $13,385
c. $26,280.
d. $14,497.
e. $12,167.

Question

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Omm2 Omm2 · Answer 1 · 2021-03-09T14:00:36+01:00

Answer:

a. $13,385.

Explanation:

Given - Green Industries purchased a machine from Cyan Corporation

on October 1, 2021. In payment for the $146,000 purchase,

Green issued a one-year installment note to be paid in equal

monthly payments at the end of each month. The payments

include interest at the rate of 18%.

To find - Monthly installment payments are closest to ?

Proof -

Given that ,

Purchase Amount = $ 146,000

No.of Periods (n) = 1 year(12 months)

Now,

Monthly interest rate (i) = Interest rate / No. Of Period

= [tex]\frac{18}{12}[/tex]% = 1.5%

Now,

Monthly installment payment = Machine Purchase Amount / Present Value of annuity

Here, n= 12 , i = 1.5%

So,

Present Value of annuity = 10.90751

∴ we get

Monthly installment payment = [tex]\frac{146,000}{10.90751}[/tex]

= $ 13,385

⇒Monthly installment payment = $ 13,385

So,

The correct answer is - a. $13,385.