TVM56 -Cost of Machine Purchased on Installment

Audio Transcript

What amount should be recorded as the cost of a machine purchased December 31, 2019, which is to be financed by making 8 annual payments of $12,000 each beginning December 31, 2020? The applicable interest rate is 7.5%.

 

Compute the cost of machine purchased on installment

 

Enter the known variables.

The payment, PMT, is -$12,000.

The rate is 7.5%.

The number of periods, NPER, is 8.

We go to the Formulas tab and look for the PV function.

We click on PMT,

We click on rate,

We click on NPER.

Click OK

The present value, PV, is $70,288