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anonymous

  • 5 years ago

What is the present worth of a machine if its return is $3500 per year for eight years, if the effective annual interest rate is taken to be 8%. My answer is: $20,113.....is this correct?

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  1. anonymous
    • 5 years ago
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    what did you do to get the answer?

  2. anonymous
    • 5 years ago
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    p=3500(1+0.08)^8 my answer is: $6.478

  3. anonymous
    • 5 years ago
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    return is not the principal amount. It is the profit on the principal amount at the rate of return. You are wrong, Nancy

  4. anonymous
    • 5 years ago
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    if return use this; p=3500(1-0.08)^8

  5. anonymous
    • 5 years ago
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    $ 1.796.27

  6. anonymous
    • 5 years ago
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    huh?

  7. anonymous
    • 5 years ago
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    Well, first I found a factor that would convert the cash flow pattern from an annuity to present value. The factor I came up with is [((1+0.08)^(8))-1]/[0.08(1+0.08)^(8)], which equals 5.747. Then I multiplied that factor by my intitial annuity. So, 5.747(3500)=$20,113.23

  8. anonymous
    • 5 years ago
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    sounds right to me.

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