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The Gulf Tourism Company purchased a building for its offices at the end of the year, at a value of 85,000 riyals, and paid 24 percent of the value as a down payment, provided that the remaining amount is paid in fifteen equal annual payments, including the principal and 10 percent compound interest on the remaining balance.
. 1 What is the amount of the annual payment that the company must pay when the required interest rate is 5%, 20%, 15%, 10% or 25%? Compare the annual payment for each interest rate and select the best rate to reduce financing costs, giving reasons.
2 What is the amount required to be paid at the end of the period if the company decides to pay the remaining amount on:
a. 5 payments with 25% interest
B. 15 Payment with 10% interest
C 10 payments with 5% interest
d 8 payments with 20% interest
e. 12 payments with 12% interest
Compare the amounts to be paid at the end of the period and select the least costly financing decision for the company.