Dipendra has an investment of 12 million The Rabo Bank is wi

Dipendra has an investment of $12 million. The Rabo Bank is willing to finance this at 9% interest rate. The loan would be repaid with 20 equal annual end-of year payments. The annual payments would be equal to:

Solution

R = 9%

Number of periods = 20

Present value = 12,000,000

Present value = Annuity * [ 1 - 1 / ( 1 + R)ⁿ] / 0.09

12,000,000 = Annuity * [ 1 - 1 / ( 1 + 0.09)²⁰] / 0.09

12,000,000 = Annuity * 9.128546

1,314,557.7 = Annuity

Annual payments are $1,314,557.7

You can also find the vlaue using a financial calculator:

PV 12,000,000

N 20

I/Y 9

CPT PMT