Asked by Nikki Congdon on May 07, 2024
Verified
Protocol Company has acquired equipment from a dealer that requires equal payments of $12,000 at the end of each of the next five years.This transaction includes interest at 9%,compounded annually.What is the value of the machine today?
Compounded Annually
A method of calculating interest in which the accumulated interest is added to the principal sum at the end of each year, increasing the amount of interest earned in subsequent years.
Equal Payments
A method of recurring payment where the same amount is paid in each period, commonly used in loans and leases.
- Assess the present-day value of future cash flows or investments to appraise their current financial importance.
- Apply the strategies of compounding interest on a semiannual and annual basis in financial calculations.
Verified Answer
JM
Jouliet MoralesMay 08, 2024
Final Answer :
$46,676
The PV factor on the Present Value of an Annuity table when n = 5 and i = 9% is 3.8897
Present Value = Future Value * PV of an Annuity Factor
Present Value = $12,000 * 3.8897 = $46,676
The PV factor on the Present Value of an Annuity table when n = 5 and i = 9% is 3.8897
Present Value = Future Value * PV of an Annuity Factor
Present Value = $12,000 * 3.8897 = $46,676
Learning Objectives
- Assess the present-day value of future cash flows or investments to appraise their current financial importance.
- Apply the strategies of compounding interest on a semiannual and annual basis in financial calculations.