Scenario:
Golf Course installing a new AutomaticSprinkler SystemThe eighteen-hole Redwood Golf Course is in need of a new sprinkler system, which is estimatedto cost $1 million. The Golf Course Superintendent, who is in charge of maintaining the golfcourse, has advised the members that the system must be replaced within the next year becausethe system is beginning to fail. The board of directors has known about this problem for severalyears but has been putting off the repair due to the cost.The members, however, have been complaining because the condition of the course isdeteriorating. After looking into the matter further, the Board estimates that the property haslost nearly $250,000 in incremental profits over the past year alone due to membership terminationsand lower guest fees and golf shop sales. If this problem is not solved quickly, moremembers will leave and revenues will continue to decrease.Mr. Hans Tripler, general manager of Redwood, has requested a loan for $1 million from alocal bank. The bank has offered to grant the loan at a 6.5% interest rate for a term of ten years.
Question:
1. Calculate the annual payment on the loan. (please show work)