| Exercise 6-11 |
 |
Amos Excavating Inc. is purchasing a bulldozer. The equipment has a price of $103,000. The manufacturer has offered a payment plan that would allow Amos to make 12 equal annual payments of $16,628, with the first payment due one year after the purchase.
(a) How much total interest will Amos pay on this payment plan? (Round answers to 0 decimal places, e.g. $458,581.)
(b) Amos could borrow $103,000 from its bank to finance the purchase at an annual rate of 11%. Should Amos borrow from the bank or use the manufacturer's payment plan to pay for the equipment?
Derek Lee just received a signing bonus of $1,000,000. His plan is to invest this payment in a fund that will earn 11%, compounded annually.
(a) If Lee plans to establish the DL Foundation once the fund grows to $3,151,760, how many years until he can establish the foundation?
(b) Instead of investing the entire $1,000,000, Lee invests $300,000 today and plans to make 9 equal annual investments into the fund beginning one year from today. What amount should the payments be if Lee plans to establish the $3,151,760 foundation at the end of 9 years?