Ace Manufacturing is building a new facility that will cost

Ace Manufacturing is building a new facility that will cost $44M. Ace will borrow $40M from First National Bank and pay the remainder immediately as a down payment. Ace will pay 7% interest but will make no payments for 4 years, at which time the entire amount will be due. How large will Ace\'s payment be?

Solution

P = $40M

i = 7%

n = 4

F = P(F/P, i, n) = 40(F/P, 7%, 4) = 40 (1.311) = $52.44