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Ace Manufacturing is building a new facility that will cost $44M. Ace will borrow $40M from First National Bank and pay the remainder immediately as a down payment. Ace will pay 7% interest but will make no payments for 4 years, at which time the entire amount will be due. How large will Ace's payment be?

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3 Feb 2021
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On December 31, Year One, Ace signs a lease to use a truck forfour years. The truck has a current value of $58,600. Four annualpayments of $10,000 are to be paid with the first made on December31, Year One. After that time, the truck (with an expected life ofeight years) will be returned to the lessor. Ace has an incrementalborrowing rate of 6 percent. The lessor has an implicit annualinterest rate of 8 percent built into the contract. Ace is aware ofthis implicit rate. The present value of a four-year annuity due of$10,000 at a 6 percent annual rate is $36,700. The present value ofa four-year annuity due of $10,000 at an 8 percent annual rate is$35,770. What liability should Ace report on its December 31, YearOne, balance sheet?

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a.$4,089

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