Taggart Transcontinental currently has a bank loan outstanding that requires it to make three annual payments at the end of the next three years or 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 in the amount of $3,184,000.If the interest rate on the loan is 6%,then the annual payment the bank will require to make Taggart Transcontinental indifferent between the two forms of payments is closest to:
A)$2,673,000
B)$2,000,000
C)$1,673,000
D)$1,000,000

Question

Quizplus · Accepted Answer

C)FV = PV(1 + i)^N = $1,000,000(1.06)² + 1,000,000(1.06)¹ + 1,000,000 = 3,183,600

Taggart Transcontinental Currently Has a Bank Loan Outstanding That Requires