Use the following 8% interest factors. Present Value of Ordinary Annuity Future

Question

Use the following 8% interest factors.

Present Value of
Ordinary Annuity

Future Value of
Ordinary Annuity

7 periods

5.20637

8.92280

8 periods

5.74664

10.63663

9 periods

6.24689

12.48756

What amount should be recorded as the cost of a machine purchased December 31, 2017, which is to be financed by making 8 annual payments of $24100 each beginning December 31, 2018? The applicable interest rate is 8%.

Present Value of
Ordinary Annuity

Future Value of
Ordinary Annuity

7 periods

5.20637

8.92280

8 periods

5.74664

10.63663

9 periods

6.24689

12.48756

Explanation / Answer

Present value=$24100*Present value of annuity factor(8%,8)

=$24100*5.74664

which is equal to

=$138494.024(Approx).

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