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On January 1, 2021, Lumberjack Co. needed to purchase a new log jammer; however, due to cash flow problems Lumberjack will not be able to make payments on the jammer until January 1, 2025. Lumberjack could buy the jammer on January 1, 2021 for $120,000 cash but instead has agreed to make 3 equal annual payments beginning January 1, 2025. The seller expects to earn interest at a rate of 8%.   Calculate the annual payment if Lumberjack purchases the jammer on January 1, 2021 and pays for it by making three equal annual payments starting on January 1, 2025

On January 1, 2021, Lumberjack Co. needed to purchase a new log jammer; however, due to cash flow problems Lumberjack will not be able to make payments on the jammer until January 1, 2025. Lumberjack could buy the jammer on January 1, 2021 for $120,000 cash but instead has agreed to make 3 equal annual payments beginning January 1, 2025. The seller expects to earn interest at a rate of 8%.   Calculate the annual payment if Lumberjack purchases the jammer on January 1, 2021 and pays for it by making three equal annual payments starting on January 1, 2025

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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On January 1, 2021, Lumberjack Co. needed to purchase a new log jammer; however, due to cash flow problems Lumberjack will not be able to make payments on the jammer until January 1, 2025. Lumberjack could buy the jammer on January 1, 2021 for $120,000 cash but instead has agreed to make 3 equal annual payments beginning January 1, 2025. The seller expects to earn interest at a rate of 8%.

 

Calculate the annual payment if Lumberjack purchases the jammer on January 1, 2021 and pays for it by making three equal annual payments starting on January 1, 2025

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