Webster Mining is considering the purchase of a new sorting machine.The quote consists of a quarterly payment of $29,600 for seven years at 8 percent interest.What is the purchase price of the equipment?

Question

Quizplus · Accepted Answer

In order to find the purchase price of the equipment, we need to calculate the present value of the payments using the formula:

PV = PMT x ((1 - (1 / (1+r)^n)) / r)

Where PV is the present value, PMT is the quarterly payment, r is the interest rate per quarter, and n is the total number of quarters.

Substituting the given values, we get:

PV = 29,600 x ((1 - (1 / (1+0.08/4)^28)) / (0.08/4))
PV = 29,600 x ((1 - (1 / 1.656393)) / 0.02)
PV = 29,600 x (0.397648 / 0.02)
PV = $629,925.66

Therefore, the purchase price of the equipment is $629,925.66. Option B is the correct answer.

Webster Mining Is Considering the Purchase of a New Sorting