A company borrows $10,000 and issues a 5-year, 6% installment note with interest payable annually. The...

A company borrows $10,000 and issues a 5-year, 6% installment note with interest payable annually. The factor for the present value of an annuity at 6% for 5 years is 4.2124. The factor for the present value of a single sum at 6% for 5 years is 0.7473. The present value of the interest payments is $2,527.44.

Expert Solution

The present value of investment is calculated as follows:

Present value of investment = ( $10,000 * 6%) * PVIFA*(5%, 5years ) + $10,000 PV*( 5%, 5years )

= $600 * 4.2124 + $10,000 * 0.7473

= $2,527.44 + $7473

= $10,000

The present value of investment is $ $10,000

ekkarill92 answered 1 year ago

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