A start-up company that makes robotic hardware for CIM (computer integrated manufacturing) systems borrowed $1 million to expand its packaging and shipping facility. The contract required the company to repay the lender through an innovative mechanism called “faux dividends,” a series of uniform annual payments over a fixed period of time. If the company paid $290,000 per year for 5 years, what was the interest rate on the loan?
What will be an ideal response?
1,000,000 = 290,000(P/A,i,5)
(P/A,i,5) = 3.44828
Interpolate between 12% and 14% interest tables or use Excel’s RATE function
By RATE, i = 13.8%
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