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Crane Corp. financed the purchase of a machine by making payments of $30500 at the end of each of five years. The appropriate rate of interest was 6%. The future value of one for five periods at 6% is 1.33823. The future value of an ordinary annuity for five periods at 6% is 5.63709. The present value of an ordinary annuity for five periods at 6% is 4.21236.
What was the cost of the machine to Crane?

Respuesta :

Answer:

$128,477

Explanation:

Given that

Payment to finance for purchasing the machine = $30,500

Rate of interest = 6%

Future value of one for five periods at 6% is 1.33823

The future value of an ordinary annuity for five periods at 6% is 5.63709.

The present value of an ordinary annuity for five periods at 6% is 4.21236.

So by considering the above information, the cost of the machine is

= Payment to finance for purchasing the machine  × present value of an ordinary annuity for five periods at 6%

= $30,500 × 4.21236

= $128,477

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