1. Your company, Bearcat Inc., is planning to purchase newequipment with a price of $1,165,000. Bearcat Inc. is working outthe financing plan with the manufacturer, and is considering thechoice to finance for 36, 48, or 60 months at an annual interestrate of 5.124%. But you want to pay off the loan as quicklyas possible. Bearcat Inc. has other projects in thecompany that require cash flow, therefore, you have someconstraints that have to be considered when choosing the paymentschedule. The payment budget per month is $28,000. After 24 months,you have the ability to add a balloon payment of up to $55,000;however, the manufacturer will only accept a balloon paymentwith your last monthly payment. They will allowyou to make smaller additional principal payments throughout thelife of the loan, but they must be the same amount each month(other than with the last payment, when you can make the largeballoon payment).

Create the full amortizationschedule (including any additional payment, such as theballoon payment). Stop the schedule with the month that has abeginning balance of zero, and show only the beginning balance forthat month on the schedule (meaning, don’t show payments for thatmonth).

Your full amortization schedule shouldconsider the following: (don’t explicitly write it out)

1. What length of financing do you choose?
2. What is the normal monthly required payment?
3. Do you pay any extra per month, and if so, how much?
4. What is the earliest month in which you can pay off the loan(meaning, in which month does the final payment occur)?
5. What is the amount of the balloon payment?
6. What is the total interest paid?