A Company Enters into an Agreement to Make Five Annual

question 154

Short Answer

A company enters into an agreement to make five annual year-end payments of $3,000 each,which will begin one year from now.The annual interest rate is 6%.The present value of an annuity factor for five periods,6%,is 4.2124.What is the present value of these five payments?

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Definitions:

Ethanol Program

A government initiative aimed at promoting the use of ethanol, a renewable fuel derived from plant materials, to reduce dependence on oil and decrease greenhouse gas emissions.

American Consumers

Individuals or groups in the United States who purchase goods and services for personal use.

Total Spending

The aggregate expenditure on goods and services in an economy over a specific period, including consumer spending, government spending, and investment spending.

Price-Inelastic

A characteristic of a product or service when consumers’ demand does not change significantly with a change in its price.