Stellar, Inc

Accounting Aug 12, 2020

Stellar, Inc. owes $41,600 to Ritter Company. How much would Stellar have to pay each year if the debt is retired through four equal payments (made at the end of the year), given an interest rate on the debt of 10%? (Round factor values to 5 decimal places, e.g. 1.25124. Round answers to the nearest whole dollar, e.g. 5,275.)

Expert Solution

Computation of the amount paid each year:-

Present value of annuity = Annuity*(1-(1 + rate)^-n)/rate

$41,600 = Annuity * (1-(1+10%)^-4)/10%

Annuity = $41,600 / 3.16987

= $13,123.59 Or $13,124

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