Torsion Brothers must begin making payments on a contract. In the first year, the company is supposed to pay $6038, with payments scheduled to decrease by $130 each subsequent year. Torsion will make the payments for 13 years. Also, Torsion must make a single, large payment of $43523 at the end of year 7. For budgeting purposes and strategic planning, the company would like to make annual, equal payments instead of the payments specified in the contract. (The contract will allow this. The company holding the contract just wants the equivalent value of the contract as specified in the terms above.) Using an interest rate of 3%, calculate the annual payment Torsion must make to fulfill the obligations of the contract.
Note: The first payment will occur at the end of year 1 and the last payment will occur at the end of year 13.
Torsion Brothers must begin making payments on a contract. In the first year, the company is supposed to pay $6038, with payments scheduled to decrease by $130 each subsequent year. Torsion will make the payments for 13 years. Also, Torsion must make a single, large payment of $43523 at the end of year 7. For budgeting purposes and strategic planning, the company would like to make annual, equal payments instead of the payments specified in the contract. (The contract will allow this. The company holding the contract just wants the equivalent value of the contract as specified in the terms above.) Using an interest rate of 3%, calculate the annual payment Torsion must make to fulfill the obligations of the contract.
Note: The first payment will occur at the end of year 1 and the last payment will occur at the end of year 13.
