Which of the following transactions would best use the present value of an annuity due of 1 table?
A)Bengatti,Inc.leases a truck for 5 years with annual lease payments of $20,000 to be made at the beginning of each year.
B)Turkel Co.leases a warehouse for 7 years with annual lease payments of $120,000 to be made at the end of each year.
C)Ponzi,Inc.borrows $40,000 and has agreed to pay back the principal plus interest in three years.
D)Skool,Inc.wants to deposit a lump sum to accumulate $80,000 for the construction of a new parking lot in 4 years.

Question

Quizplus · Accepted Answer

The present value of an annuity due of 1 table is used to determine the present value of a series of cash flows made at the beginning of each period. Option A, where Bengatti leases a truck with annual payments to be made at the beginning of each year, is the best choice for using the present value of an annuity due of 1 table.

Which of the Following Transactions Would Best Use the Present