**Problem on Present Value of Annuity****Question:**Whispering Winds Corp. has just purchased equipment that requires annual payments of $75,000 to be paid at the end of each of the next 5 years. The appropriate discount rate is 15%. What is the present value of the payments?**Options:**- $251,412- $184,188- $287,348- $297,213---To solve this problem, we need to calculate the present value of an annuity. The formula for the present value of an annuity is:\[ PV = P \times \left( \frac{1 - (1 + r)^{-n}}{r} \right) \]where:- $ PV $ is the present value- $ P $ is the annual payment (in this case, $75,000)- $ r $ is the discount rate (in this case, 15% or 0.15)- $ n $ is the number of years (in this case, 5)Let's apply the formula:\[ PV = 75{,}000 \times \left( \frac{1 - (1 + 0.15)^{-5}}{0.15} \right) \]First, calculate $(1 + r)^{-n}$:\[ (1 + 0.15)^{-5} = (1.15)^{-5} \approx 0.4972 \]Then, calculate the rest of the equation:\[ 75{,}000 \times \left( \frac{1 - 0.4972}{0.15} \right) = 75{,}000 \times \left( \frac{0.5028}{0.15} \right) \approx 75{,}000 \times 3.352 \approx 251{,}400 \]Hence, the closest option is:- $251,412Therefore, the correct answer is $251,412.

Present value is calculated based on annual cash flows and the discount rate. The annual payment is…

Whispering Winds Corp. has just purchased equipment that requires annual payments of $75000 to be paid at the end of each of the next years. The appropriate discount rate is 15%. Wh is the present value of the payments? O $251412 O $184188 O $287348 O $297213

Whispering Winds Corp. has just purchased equipment that requires annual payments of $75000 to be paid at the end of each of the next years. The appropriate discount rate is 15%. Wh is the present value of the payments? O $251412 O $184188 O $287348 O $297213

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Find the present value of an investment in plant and equipment if it is expected to provide annual earnings of $70000 for 15 years and to have a resale value of $130000 at the end of that period. Assume a 11% rate and earnings at year end. The present value of 1 at 11% for 15 periods is 0.20900. The present value of an ordinary annuity at 11% for 15 periods is 7.19087. The future value of 1 at 11% for 15 periods is 4.78459.
Cullumber Excavating Inc. is purchasing a bulldozer. The equipment has a price of $99,800. The manufacturer has offered a payment plan that would allow Cullumber to make 10 equal annual payments of $19,900.00, with the fırst payment due one year after the purchase. How much total interest will Cullumber pay on this payment plan? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Total interest $4
Thanksuu
Using the previous table, enter the correct factor for three periods at 5%: Periodic payment x Factor = Present value $6,000 x = $16,338 The controller at Ross has determined that the company could save $6,000 per year in engineering costs by purchasing a new machine. The new machine would last 12 years and provide the aforementioned annual monetary benefit throughout its entire life. Assuming the interest rate at which Ross purchases this type of machinery is 9%, what is the maximum amount the company should pay for the machine? $fill in the blank 5aca5ff34fa005f_2 (Hint: This is basically a present value of an ordinary annuity problem as highlighted above.) Assume that the actual cost of the machine is $50,000. Weighing the present value of the benefits against the cost of the machine, should Ross purchase this piece of machinery? Use snippets to answer
Your company is considering purchasing an expensive plece of equipment. The manufacturer of the equipment offers a payment plan to pay $100,000 annually for 4 years. Assuming no other cash flow, the first payment is due at the end of the first year, and an interest rate of 6%, the minimum Present amount of money you will need is most nearly O $370,000 O $380.000 O 390.000 O 5400,000 O 5410.000 O S420.000
Crane Excavating Inc. is purchasing a bulldozer. The equipment has a price of $103,000. The manufacturer has offered a payment plan that would allow Crane to make 10 equal annual payments of $18,229.37, with the first payment due one year after the purchase. (a) How much total interest will Crane pay on this payment plan? (Round answer to 0 decimal places, e.g. 458,581.) Total interest
Q1. A machine costs the company K98,000 and its effective life is estimated to be 12 years. If the scrap realizes K3,000 only, what amount should be retained out of profits at the end of each year to accumulate at compound interest at 5% per annum? Q2. A mortgage of K200,000 is to be repaid over a 25 year period at a fixed interest rate of 4.5 %. Calculate the monthly repayments.
Blackstone Company purchased a new software system costing $35,000. To finance the purchase, Blackstone signed a contract agreeing to pay the cost over the next 8 years, with a payment due every six months; the first payment will be made six months from the date of purchase. Blackstone's usual interest rate is 10%. What is the amount of the payment required (rounded to the nearest dollar)? 's usual 096, What is the amount of the Select one: O a. 16,030 O b. 6,560 O c. 3,229 d. 2,575 e. None of the above
Supposed amarriedcouple wishesto acquire aluxurious condominium in Tagaytay.Thiscan be acquired by a downpayment of P700,000and a yearly payment of P150,000 at the end of each year for a period of 10 years, starting at the end of 5 years from the date of purchase. If money is worth 15% compounded annually, what is the cash price of the property?
Vaughn Excavating Inc. is purchasing a bulldozer. The equipment has a price of $97,600. The manufacturer has offered a payment plan that would allow Vaughn to make 10 equal annual payments of $15.883.95, with the first payment due one year after the purchase. x Your answer is incorrect. How much total interest will Vaughn pay on this payment plan? (Round factor values to 5 decimal places, eg 1.25124 and final answer to 0 decimal places, eg. 458.5811 Total interest 501877 Your answer is partially correct. Vaughncould borrow $97,600 from its bank to finance the purchase at an annual rate of 9% Click here to view factor tables Should Vaughn borrow from the bank or use the manufacturer's payment plan to pay for the equipment? (Round factor values to decimal places, s 1.25124 and final answer to O decimal places, eg 7%) 15.00 % Manufacturer's rate from the Da
Help me fast
What is the present value of $10,000 that is to be received in 9 years, if the discount rate is 7% APR compounded annually? A) 5439 B) 5568 C) 5584 D) 5775