A company borrowed cash from the bank by signing a 5-year,8% installment note.The present value of an annuity factor at 8% for 5 years is 3.9927.The present value of a single sum at 8% for 5 years is .6806.Each annual payment equals $75,000.The present value of the note is:
A)$56,352.84.
B)$18,784.28.
C)$375,000.00
D)$299,452.50.
E)$110,196.89.

Question

Quizplus · Accepted Answer

To calculate the present value of the note, we need to use the formula:

PV = Payment x (PV of an annuity factor + PV of a single sum)

PV = $75,000 x (3.9927 + 0.6806)
PV = $75,000 x 4.6733
PV = $350,498.80

Therefore, the present value of the note is $350,498.80. None of the given answer choices matches this exact amount, but the closest one is option D: $299,452.50. This is off by about $51,000, but it is still the closest choice to the correct answer.

A Company Borrowed Cash from the Bank by Signing a 5-Year,8