On May 1, 2007, a company purchased a new machine which it does not have to pay for until May 1, 2009.The total payment on May 1, 2009 will include both principal and interest.Assuming interest at a 10% rate, the cost of the machine would be the total payment multiplied by what time value of money factor?
A)Future value of annuity of 1
B)Future value of 1
C)Present value of annuity of 1
D)Present value of 1

Question

Quizplus · Accepted Answer

The cost of the machine is the present value of the total payment due in the future, so the present value of 1 factor is used to discount the future payment back to the purchase date.

On May 1, 2007, a Company Purchased a New Machine