Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement. It can either make immediate payment of $2,503,000, or it can make annual payments of $288,500 for 15 years, each payment due on the last day of the year. Click here to view factor tables. Which method of payment do you recommend, assuming an expected effective interest rate of 8% during the future period? (Round factor values to 5 decimal places, eg. 1.25124 and final answer to 0 decimal places, eg. 458,581)
Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement. It can either make immediate payment of $2,503,000, or it can make annual payments of $288,500 for 15 years, each payment due on the last day of the year. Click here to view factor tables. Which method of payment do you recommend, assuming an expected effective interest rate of 8% during the future period? (Round factor values to 5 decimal places, eg. 1.25124 and final answer to 0 decimal places, eg. 458,581)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement. It can either
make immediate payment of $2,503,000, or it can make annual payments of $288,500 for 15 years, each payment due on the last day
of the year.
Click here to view factor tables.
Which method of payment do you recommend, assuming an expected effective interest rate of 8% during the future period? (Round
factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)
Present value of annual payments $
Recommended payment method
2469416
Annual Payments
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