Dawson Community College Acme Manufacturing Purchase Memo

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You have just been hired by a local manufacturing company named Acme Manufacturing. They are
considering purchasing a new piece of equipment that costs $25,000. The seller has offered Acme
Manufacturing the option of purchasing it at nothing down and $5,500 per year for 6 years. Your new
supervisor wants to know the interest rate that Acme would end up paying. The formula relating
current purchase cost, P, to annual payments, A, for n years, and interest rate i is:
i · (1 + i)”
A = P.
(1 + i)” – 1
You are tasked with solving for the interest rate, i. The interest rate is typically communicated as a
percent, but in this formula it is not a percent but a value between 0 – 1, i.e., 5% interest would be i =
0.05. You should use the broyden1() function in scipy.optimize to solve this nonlinear equation. Based
on the interest rate you determine, would you recommend that Acme purchase the equipment on
payments or just purchase it today (i.e., how does the interest rate compare with typical interest rates
on loans today)? A figure is not required. Include your computer code in the appendix.