Russell Company has acquired a building with a loan that requires payments of $20,000 every six months for 5 years.The annual interest rate on the loan is 12%.What is the present value of the building? (PV of $1,FV of $1,PVA of $1,and FVA of $1)$\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$
A)$72,096
B)$113,004
C)$147,202
D)$86,590
E)$200,000

Question

Quizplus · Accepted Answer

The payment of $20,000 every six months for 5 years is a total of 10 payments. Using the formula for the present value of an annuity, we have:

PV = PMT x [(1 - (1 + r/n)^(-nt))/(r/n)]
PV = $20,000 x [(1 - (1 + 0.12/2)^(-2*5))/(0.12/2)]
PV = $147,202

Therefore, the present value of the building is $147,202, which is closest to choice C.

Russell Company Has Acquired a Building with a Loan That (Use appropriate factor(s)from the tables provided.)\bold{\text{(Use appropriate factor(s)from the tables provided.)}}(Use appropriate factor(s)from the tables provided.)

Russell Company Has Acquired a Building with a Loan That $\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$