A Company Buys a Color Printer That Will Cost $16,000

question 31

Multiple Choice

A company buys a color printer that will cost $16,000 to buy, and last 5 years. It is assumed that it will require servicing costing $500 each year. What is the equivalent annual annuity of this deal, given a cost of capital of 8%?

• A) -$3155
• B) -$3606
• C) -$4057
• D) -$4507

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Definitions:

Prepaying Bonds

The action of repaying the principal of a bond before its maturity date, often as a way to manage debt or save on interest costs.

Outstanding Bonds

Bonds issued by an entity that are currently not redeemed and are in the hands of investors.

Semiannual Interest

Interest that is calculated and paid twice a year on investments or loans.

Par Value

The nominal or face value of a stock or bond, which is the amount stated on the certificate or instrument.