Charlie Corp. is purchasing new equipment with a cash cost of $250,000 for an assembly line. The manufacturer has offered to accept $57,400 payment at the end of each of the next six years. How much interest will Charlie Corp. pay over the term of the loan?

Question

Quizplus · Accepted Answer

The total payment over six years is $57,400 * 6 = $344,400. Subtracting the cash cost of the equipment ($250,000) from the total payment ($344,400) gives the interest paid over the term of the loan, which is $94,400.