A. Lindner Inc. is going to purchase new equipment with a price of $625,000, which the manufacturer is willing to finance, and Lindner Inc. is trying to work out a payment schedule. Due to cash flow needs elsewhere in the company, its payment budget per month is $15,000. After 36 months, it has the ability to add a balloon payment of up to $42,500; however, the manufacturer will only allow a balloon payment with its last monthly payment. Also, it will allow Lindner Inc. to make smaller additional principal payments, say $1,000 every month from the 1st month. The additional principal amount must be the same amount each month other than with the last payment, when the company can make the large balloon payment. Lindner Inc. has the choice to finance for 36, 48 or 60 months, at an annual interest rate of 5%. But Lindner Inc. wants to pay off the loan as quickly as possible.
Required:
a. What length of financing does Lindner Inc. choose?
b. What is the normal monthly required payment?
c. What is the earliest month in which the company can pay off the loan (meaning, in which month does the final payment occur)?
d. What is the amount of the balloon payment?
e. What is the total interest paid?
Answers: 3
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A. Lindner Inc. is going to purchase new equipment with a price of $625,000, which the manufacturer...
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