Question

Spectra Scientific of Santa Clara, California, manufactures Q-switched solid-state industrial lasers for LED substrate scribing and silicon wafer dicing. The company got a $46 million loan, amortized over a 6-year period at 8% per year interest.

Required:
What is the amount of the unrecovered balance immediately before the payment is made at the end of year 1?

Answer 1

The amount of the unrecovered balance immediately before Spectra Scientific of Santa Clara, California made the first payment at the end of year 1 is $49,680,000.00.

What is future value?

The unrecovered amount is the future value of the loan at the end of year 1 after the first year's interest has been added, and before subtracting the first payment.

The future value can be computed using the Future Value Formula below or an online finance calculator as follows:

Future Value Formula:

FV = PV(1+r)^{n}

FV = future value

PV = present value

r = annual interest rate

{n} = number of periods interest held

Data and Calculations:

N (# of periods) = 6 years

I/Y (Interest per year) = 8%

PV (Present Value) = $46,000,000

PMT (Periodic Payment) = $0

Results:

FV = $49,680,000.00

Annual Schedule of Payment and Balance:

Period       PV                   PMT             Interest                    FV

1 $46,000,000.00 $0.00 $3,680,000.00 $49,680,000.00

Thus, the amount of the unrecovered balance immediately before Spectra Scientific of Santa Clara, California made the first payment at the end of year 1 is $49,680,000.00.

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