Taggart Transcontinental Currently Has a Bank Loan Outstanding That Requires

question 77

Multiple Choice

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

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Definitions:

Income Statement

A report that outlines an organization's earnings and costs for a set period, culminating in a net gain or shortfall.

Factory Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor costs, such as utilities and rent for the factory.

Indirect Labor

Labor costs of workers who assist in or facilitate the manufacturing process but do not directly work on the product.

Prime Costs

Direct materials and direct labor costs that are directly associated with the production of goods.