Question

Taggart Transcontinental currently has a bank loan outstanding that requires it to make three annual payments at the end of the next three years of $1,000,000 each. The bank has offered to allow Taggart Transcontinental to skip making the next two payments in lieu of making one large payment at the end of the loan's term in three years. If the interest rate on the loan is 6%, then the final payment that the bank will require to make Taggart Transcontinental indifferent between the two forms of payments is closest to:

Answer 1

Answer:

Future value is approximately $3,183,600 which is equal to $3,184,000.

Explanation:

Please see attachment

Answer 2

Taggart Transcontinental indifferent between the two forms of payments is closest to $3,183,600.

What is future value?

Future value explains the future worth of money of the current asset of the business. It is useful for financial investors as they would be able to measure the value of their investment money in the future.

Computation of future value annuity

$Amount*[{(1+0.06)^{3} - 1}/0.06]\\=1383600$

Hence, the future value would be derived as $3183600.

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