A Machine Is Purchased by Making Payments of $8,000 at the Beginning

question 124

Multiple Choice

A machine is purchased by making payments of $8,000 at the beginning of each of the next five years. The interest rate was 10%. The future value of an ordinary annuity of 1 for five periods is 6.10510. The present value of an ordinary annuity of 1 for five periods is 3.79079. What was the cost of the machine?

• A) $53,725
• B) $48,841
• C) $33,359
• D) $30,327

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Definitions:

Investing Activities

Financial actions involving the purchase and sale of long-term assets and other investments not considered cash equivalents.

Operating Activities

Business activities directly related to the production and delivery of goods and services, affecting the firm's cash flow.

Financing Activities

Transactions related to a company's funding, including issuing debt, repaying loans, or dividend payments.

Issuance

The process of making securities available for sale by a company, typically involving stocks or bonds.