XYZ Company is building an addition (building and machinery) to its manufacturing plant to increase its production capacity.  The cost of the addition is $1,230,000.  Its lender is willing to make a loan to the company at 70% loan to value, for 20 years, payments made monthly, and at an interest rate of 5% APR.  a.  What is the total amount of monthly payments? b. What will be the total amount of interest paid on this loan? c. How much of the first monthly payment will be interest and how much of the last monthly payment will be interest?

Financial Management: Theory & Practice
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ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter19: Lease Financing
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XYZ Company is building an addition (building and machinery) to its manufacturing plant to increase its production capacity.  The cost of the addition is $1,230,000.  Its lender is willing to make a loan to the company at 70% loan to value, for 20 years, payments made monthly, and at an interest rate of 5% APR. 

a.  What is the total amount of monthly payments?

b. What will be the total amount of interest paid on this loan?

c. How much of the first monthly payment will be interest and how much of the last monthly payment will be interest?


 
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