Perdue Company has purchased equipment that requires annual payments of $30000 to be paid at the end of each of the next 6 years. The appropriate discount rate is 12%. What amount will be used to record the equipment?
A) $180000
B) $123342
C) $165772
D) $115650

Question

Quizplus · Accepted Answer

To find the present value of the annual payments, we can use the formula:

PV = Payment*[1 - (1+r)^-n]/r

where:
Payment = $30,000
r = 12%
n = 6

Plugging in the values, we get:

PV = $30,000*[1 - (1+0.12)^-6]/0.12 = $123,342

Therefore, the amount used to record the equipment would be $123,342, which is option B.

Perdue Company Has Purchased Equipment That Requires Annual Payments of $30000