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A company wants to purchase a piece of equipment in three years that will cost $28,000...

A company wants to purchase a piece of equipment in three years that will cost $28,000 according to their best estimates. What amount do they need to invest now in a 6% interest bearing account to be able to make that purchase?

Solutions

Expert Solution

If the future value is given, then we need to calculate the discounted prices of 3 years to come at the present value.

Discount formula = 1/(1+n)^t

Or, present value = Future value /(1+n)^t

n = interest rate = 0.06

t = time = 3

Present value = 28,000/ (1+0.06)^3

= 23509.6557515

= 23510 (approximately)

jeff jeffy answered 2 years ago
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