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Calculate the annual payment for option

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Reference no: EM132420114

Your firm is planning to purchase a building for $2,000,000 to use as its new corporate headquarters. The company is considering the two financing options outlined below.

  • Pay $400,000 in cash now and finance the remainder over 10 years. Use 7% interest.
  • Pay $200,000 in cash now and finance the remainder over 15 years. The bank will

charge 8% interest given the lower down payment and longer term.

Find a and b

a. Calculate the annual payment for each option.

b. Calculate the total interest that would be paid for each.

Reference no: EM132420114

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