Cooper Company has purchased equipment that requires annual payments of $20,000 to be paid at the end of each of the next 6 years.The discount rate is 12%.The present value of one for six periods at 12% is 0.507.The present value of an ordinary annuity of one for six periods at 12% is 4.111.What amount will be assigned to the equipment?

Question

Quizplus · Accepted Answer

The present value of an ordinary annuity is calculated by multiplying the annual payment by the present value factor of an ordinary annuity. Thus, $20,000 * 4.111 = $82,220.

Cooper Company Has Purchased Equipment That Requires Annual Payments of $20,000