Question

A company purchased equipment and signed a 7-year installment loan at 9% annual interest. The annual payments equal $9,000. The present value of an annuity factor for 7 years at 9% is 5.0330. The present value of a single sum factor for 7 years at 9% is 0.5470. The present value of the loan is: Multiple Choice $63,000. $9,000. $45,297. $16,453. $4,923.

Answer 1

$45,297

Step-by-step explanation:

Data provided as per the question

Installment = $9,000

Present value factor = 5.0330

The calculation of present value is shown below:-

Present value = Installment × Present value factor

= $9,000 × 5.0330

= $45,297

Therefore for computing the present value of the loan we simply multiply the installment with present value factor.