Scenario 3

A producer bought an Eagle Crusher plant under the accelerated payment program and set up a repayment plan that allowed him to pay 40% of the cost of the equipment in the first year, 30% of the balance in the second year, 20% in the third year, and so on. The producer built equity fast because he paid for 70% of the equipment in the first two years of the financing plan. His interest costs were lower because he owed only 10% of the balance in the last year of the contract. Making smaller payments in the latter stages of the plan also freed up more money for repair and maintenance on the equipment. These expenses typically occur with any equipment after four or five years of hard use.