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Exercise 6-11 (Part Level Submission)
Buffalo Excavating Inc. is purchasing a bulldozer. The equipment has a price of $92,800. The manufacturer has offered a payment plan that would allow Buffalo to make 6 equal annual payments of $20,074.07, with the first payment due one year after the purchase. Collapse question part (a) How much total interest will Buffalo pay on this payment plan? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
Total interest $__________
Expert Answer
Cost of Equipment = $92,800
Annual Payment = $20,074.04
Number of annual payment = 6
Total Amount Paid = 6 * $20,074.04
Total Amount Paid = $120,444.24
Total Interest Paid = Total Amount Paid – Cost of Equipment
Total Interest Paid = $120,444.24 – $92,800
Total Interest Paid = $27,644.24
So, Buffalo will pay total interest of $27,644 on this payment plan.
