Mergenthaler Company has just purchased machinery that requires annual payments of $50,000 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?

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 values: PV = $50,000 × [(1 - (1 + 0.15)^-4) / 0.15] = $142,749.

Mergenthaler Company Has Just Purchased Machinery That Requires Annual Payments