FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Exercise C-8 Calculate the present value of an annuity (LOC-3)

Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options:

  1. Pay $29,500 for the car today.
  2. Pay $2,900 at the end of each quarter for three years.

1-a. Assuming Denzel uses a discount rate of 8% (or 2% quarterly), calculate the present value. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.)

 


1-b. Which option gives him the lower cost?

multiple choice
  • Option 1
  • Option 2

 

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