(b) The company is considering purchasing a new delivery truck for$1,200,000. The intention is to obtain a 5-year loan from theirbank, at an interest rate of 9% per annum. Annual payments areexpected to be made on the loan.Required:i. Calculate DEVCON Industries' annual payment on this loan.ii. Prepare the 5-year Amortization Schedule for this loan,clearly showing the interest and principal paymentannually. DEVCON INDUSTRIES LIMITEDIncome StatementFor the years ended Dec. 31, 2018 and201920182019so00'ss000'sSales9000001125000Cost of Goods Sold300000306600Gross Profit600000818400Selling and Administrative Expenses150000156000Depreciation Expense5400057000Advertising Expenses1800021000Earnings Before Interest and Taxes378000584400Interest Expense30003000Taxable Income375000581400Taxation (35%)131250203490Net Income243750377910Dividends (40%)97500151164Addition to Retained Earnings146250226746Additional InformationShare Price2127.3Ordinary Shares Outstanding120000000144000000DEVCON INDUSTRIESLIMITEDStatement of FinancialPositionAs at Dec. 31, 2018 and 2019ASSETS20182019LIABILITIES & EQUITY20182019Current Assetss00'ss000'sCurrent Liabilitiesso00'sSo00'sInventories264000276000Accounts PayablesNotes Payables138000114000Accounts Receivables294000330000150900132654Cash and Equivalents210900270000288900246654768900876000Non-current Liabilities12000090000Total Liabilities408900336654Net Fixed Assets630600690000EquityCommon Stock264000276000Retained Earnings726600953346Total Equity9906001229346Total Assets13995001566000Total Liabilities & Equity13995001566000

Present value of all loan repayments will be equal to the principal of loan. When a loan is repaid…

(b) The company is considering purchasing a new delivery truck for $1,200,000. The intention is to obtain a 5-year loan from their bank, at an interest rate of 9% per annum. Annual payments are expected to be made on the loan. Required: i. Calculate DEVCON Industries' annual payment on this loan. ii. Prepare the 5-year Amortization Schedule for this loan, clearly showing the interest and principal payment annually.

(b) The company is considering purchasing a new delivery truck for $1,200,000. The intention is to obtain a 5-year loan from their bank, at an interest rate of 9% per annum. Annual payments are expected to be made on the loan. Required: i. Calculate DEVCON Industries' annual payment on this loan. ii. Prepare the 5-year Amortization Schedule for this loan, clearly showing the interest and principal payment annually.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 17P

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