Camber Corporation has to decide if they can finance purchasing 10 new machines for all their manufacturing sites. The machines cost $1.73 million each, and the supplier agreed to the following payment terms, 40% upfront, and the remainder to be paid over 4 years at an annual rate of 12%.a) Executives at Camber Corporation review their budgets and discover that they can pay the supplier 40% now, but their budget will only allow them to pay $4,000,000 per year for the next four years. Will that be enough to make the purchase? [Note: you are supposed to show every step of your calculation and interpret the result

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Asked Oct 7, 2019
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Camber Corporation has to decide if they can finance purchasing 10 new machines for all their manufacturing sites. The machines cost $1.73 million each, and the supplier agreed to the following payment terms, 40% upfront, and the remainder to be paid over 4 years at an annual rate of 12%.
a) Executives at Camber Corporation review their budgets and discover that they can pay the supplier 40% now, but their budget will only allow them to pay $4,000,000 per year for the next four years. Will that be enough to make the purchase? [Note: you are supposed to show every step of your calculation and interpret the result

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Expert Answer

Step 1

The actual cost of each machine is $1,730,000 and total cost to be required to purchase 10 machines is $17,300,000 (10 × $1,730,000).

The down payment is $6,920,000 (40% × $17,300,000) and the loan to be required is $10,380,000 ($17,300,000 - $6,920,000). The loan amount to be paid in 4 years and the annual interest rate is 12%.

Step 2

Calculate the annual payment as follows:

MS-Excel --&...

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=PMT(12%,4,-101730000* (1-40%)) Function Arguments ? X PMT Rate 12% 0.12 = 4 Nper 4 -10*1730000* (1-40% ) Pv -10380000 Fv =number Туре | =number =3417453.449 Calculates the payment for a loan based on constant payments and a constant interest rate. Type is a logical value: payment at the beginning of the period at the end of the period 0 or omitted. 1; payment = Formula result S3,417,453.45 ок Cancel Help on this function

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