John bought a car worth $ 100,000 if paid in cash. If paid on installment basis, he will pay $ 20,000 downpayment, $ 30,000 at the end of one year; $40,000 at the end of three years and a final payment at the end of five years. Interest rate is 20% compounded annually. a) Construct the cash flow diagram if paid on installment basis: b) What will be the amount of the final payment?
John bought a car worth $ 100,000 if paid in cash. If paid on installment basis, he will pay $ 20,000 downpayment, $ 30,000 at the end of one year; $40,000 at the end of three years and a final payment at the end of five years. Interest rate is 20% compounded annually. a) Construct the cash flow diagram if paid on installment basis: b) What will be the amount of the final payment?
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money
Section: Chapter Questions
Problem 9.18E
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John bought a car worth $ 100,000 if paid in cash. If paid on installment basis, he will pay $ 20,000 downpayment, $ 30,000 at the end of one year; $40,000 at the end of three years and a final payment at the end of five years. Interest rate is 20% compounded annually.
a) Construct the cash flow diagram if paid on installment basis:
b) What will be the amount of the final payment?
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