Jenks Company Financed the Purchase of a Machine by Paying

question 63

Multiple Choice

Jenks Company financed the purchase of a machine by paying $24,000 a year for the next five years,with the first payment due one year from today.The purchase cost of the machine is considered to be the present value of those payments.What was the purchase cost of the machine to Jenks assuming a discount rate of 8%?

• A)$35,264
• B)$95,825
• C)$120,000
• D)$140,800

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Definitions:

Perfectly Competitive

A market structure where many firms sell identical products, entry and exit are easy, and no single buyer or seller can influence the market price.

Equilibrium Value

The stable value at which supply equals demand for a particular good, service, or financial instrument, leading to a balanced market condition.

Marginal Product

The additional output that results from using one more unit of a particular input, while holding other inputs constant.

Average Product

The output produced per unit of input, calculated by dividing total output by the number of units of a specific input.