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A machine is purchased by making payments of $ 20500 at the beginning of each of the next five years. The interest rate was 8%. The future value of an ordinary annuity of 1 for five periods is 5.86660. The present value of an ordinary annuity of 1 for five periods is 3.99271. What was the cost of the machine? O $ 120265 O $81852 O $ 129887 O $ 88399

A machine is purchased by making payments of $ 20500 at the beginning of each of the next five years. The interest rate was 8%. The future value of an ordinary annuity of 1 for five periods is 5.86660. The present value of an ordinary annuity of 1 for five periods is 3.99271. What was the cost of the machine? O $ 120265 O $81852 O $ 129887 O $ 88399

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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**Current Attempt in Progress** A machine is purchased by making payments of $20,500 at the beginning of each of the next five years. The interest rate was 8%. The future value of an ordinary annuity of 1 for five periods is 5.86660. The present value of an ordinary annuity of 1 for five periods is 3.99271. What was the cost of the machine? - $120,265 - $81,852 - $129,887 - $88,399 Attempt: 0 of 1 used **Buttons Available:** - Save for Later - Submit Answer
Transcribed Image Text:**Current Attempt in Progress** A machine is purchased by making payments of $20,500 at the beginning of each of the next five years. The interest rate was 8%. The future value of an ordinary annuity of 1 for five periods is 5.86660. The present value of an ordinary annuity of 1 for five periods is 3.99271. What was the cost of the machine? - $120,265 - $81,852 - $129,887 - $88,399 Attempt: 0 of 1 used **Buttons Available:** - Save for Later - Submit Answer
Expert Solution
Step 1

Cost of the machine = Present value of payment

where,

Present value of payment= Annual payment x present value factor

steps

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