Answer to Question #111115 in Economics of Enterprise for Paige Connor

Question

(b) As a prospective business owner in the waste management business, you have researched the waste management truck market and you are attracted by two similarly functional truck offers. An identical cash price of $550,000 for the ARSLAN truck and the HIDRO-MAX truck with two different monthly repayment schedules offered by the respective financiers.

The repayment schedule for the ARSLAN truck requires a down payment of 10% while the repayment schedule for the HIDRO-MAX truck requires a down payment of 15%. If the repayment is over a period of 7 years at an annual loan rate of 6%, what would be the monthly repayment amount for both schedules? Assume that the monthly repayment starts 1 month after the mortgage contract is signed and the down payment made. Show all calculations.

Answer 1

Let's make calculations for the ARSLAN truck:

Let's make calculations for the HIDRO-MAX truck:

A potential business owner in the field of waste management, having received the above results, will be able to choose a more convenient mortgage repayment schedule.