Hazel Company has just purchased equipment that requires annual payments of $40000 to be paid at the end of each of the next 4 years. The appropriate discount rate is 15%. What is the present value of the payments?
A) $114199
B) $160000
C) $46975
D) $150135

Question

Quizplus · Accepted Answer

The present value of an annuity can be calculated using the formula PV = PMT * [(1 - (1 + r)^-n) / r], where PMT is the annual payment, r is the discount rate, and n is the number of periods. Plugging in the given values (PMT = $40,000, r = 0.15, n = 4), the calculation gives a present value of approximately $114,199.

Hazel Company Has Just Purchased Equipment That Requires Annual Payments