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Coronado Industries is purchasing new equipment with a cash cost of $189200 for the assembly line. The manufacturer has offered to accept $46000 payments at the end of each of the next six years. What is the interest rate that Coronado Industries will be paying? a) 10%. b) 12%. c) 11%. d) 13%.

Respuesta :

Answer:

The correct option is b) 12%

Explanation:

Note: See the attached excel for the interest calculation.

In the question, we are given the following:

Equipment cash cost = $189,200

Yearly payment = $46,000

Number of years = 6

The above are used in the attached excel file to calculate the interest rate.

The interest rate is calculated using the following simple excel rate function in the attache excel file:

=RATE(npr,pmt,-pv)

Where;

pv = Present value = Equipment cash cost = $189,200

pmt = Yearly payment = $46,000

npr = Number of years = 6

Using the function in the attached excel file, we obtained 12%. Therefore, the correct option is b) 12%.

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