A company is considering the purchase of new machine at 450000 that will increase operating efficiency...
A company is considering the purchase of new machine at 450000
that will increase operating efficiency and save labor costs the machine will be worth 367334if the company is deferred the purchase for 3 years it is estimated that the machine will be used for ten years find
1- the annuity interest rate compounded annually
Homework Answers
Value of machine today = $450,000
In 3 years, $367,334
Time period = 3 years
Let the annual interest rate be x
367,334 = 450,000*PVF(x%, 3 years)
PVF(x%, 3 years) = 0.8163
From present value table, x = 7%
Hence, the annuity interest rate compounded annually = 7%
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