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 Topic: PP&E deferred payments ( Topic Closed)
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syousuf
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| Posted: 09 Mar 2011 at 02:13 | IP Logged
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A corporation purchased land by issuing a $150,000, 3 year non interest bearing note on Jan 1 of year 1 when the market rate of interest was 8%, the note is to be repaid in 3 equal installments of $50,000 on Dec 31 of year 1,yr2 yr 3.
What could be the answer, please need help
I got 1 answer =$50,000*2,57710=128,855 How 2.57710 is calculated
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lynxcat
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| Posted: 09 Mar 2011 at 02:52 | IP Logged
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$128,855 is correct. You must look at the Present Value of an Ordinary
Annuity $1 for 3 years, 8%. This gives you 2.55710.
Multiply your payments by 2.55710 and you reach the correct answer of
$128,855.
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mmilito
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| Posted: 09 Mar 2011 at 06:40 | IP Logged
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That 2.57710 is the present value factor of the annuity of
1 and that will either use the present value table (given)
or the formula for present value in Excel spreadsheet on
the test
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