Which of the following transactions would best use the present value of an annuity due of 1 table?
A) Fernetti, Inc. rents a truck for 5 years with annual rental payments of $20,000 to be made at the beginning of each year.
B) Edmiston Co. rents a warehouse for 7 years with annual rental payments of $120,000 to be made at the end of each year.
C) Durant, Inc. borrows $20,000 and has agreed to pay back the principal plus interest in three years.
D) Babbitt, Inc. wants to deposit a lump sum to accumulate $50,000 for the construction of a new parking lot in 4 years.

Question

Quizplus · Accepted Answer

An annuity due table is used for transactions that involve payments made at the beginning of each period, such as in option A where Fernetti, Inc. rents a truck for 5 years with annual rental payments of $20,000 to be made at the beginning of each year. The present value of annuity due table helps calculate the value of a series of future payments made at the beginning of each period in terms of today's dollars.

Which of the Following Transactions Would Best Use the Present