Question

A company purchased equipment and signed a 5-year installment loan at 10% annual interest. The annual payments equal $11,600. The present value of an annuity factor for 5 years at 10% is 3.7908. The present value of a single sum factor for 5 years at 10% is .6209. The present value of the loan is:

Answer 1

The present value of the loan is $43,973.98

Step-by-step explanation:

In order to calculate the present value of the loan we would have to make the following calculation:

Present value of the loan=annual payments*present value of an annuity factor for 5 years at 10%

annual payments=$11,600

present value of an annuity factor for 5 years at 10%=3.7908

Therefore, Present value of the loan=$11,600*3.7908

Present value of the loan=$43,973.98

The present value of the loan is $43,973.98