Question

A company borrowed cash from the bank by signing a 6-year, 6% installment note. The present value of an annulty factor at 6% for 6 years is 4.9173. The present value of a single sum at 6% for 6 years is 7050. Each annual payment equals $75,200. The present value of the note is: M

a. $369,780.96.
b. $15,292.95.
c. $451,200.00
d. $45,878.84.
e. $106,666.67

Answer 1

A

Step-by-step explanation:

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow each year from year 1 to 6 = $75,200

I = 6%

PV = $369,780.96.

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute