Asked by marlena oxendine on May 17, 2024
Verified
You have been asked to compute the cash equivalent price of a machine assuming the cost (including principal and interest) is to be paid in two unequal payments after the acquisition date.Which of the following table values would be used to find the cost of the machine?
A) Present value of a single amount.
B) Present value of an annuity.
C) Future value of a single amount.
D) Future value of an annuity.
Present Value
The current worth of a future sum of money or stream of cash flows given a specified rate of return, reflecting the time value of money.
Cash Equivalent Price
The value of an asset that is readily convertible into a known amount of cash with negligible risk of changes in value.
Acquisition Date
The specific date on which an acquisition or takeover of one entity by another is officially completed.
- Acquire knowledge on the concept of present value and its employment in managing accounts for long-term obligations and capital assets.
Verified Answer
SP
sacquah productionsMay 21, 2024
Final Answer :
A
Explanation :
The cash equivalent price of a machine, when payments are made in the future, requires calculating the present value of those future payments. Since the payments are unequal, each payment is treated as a single amount rather than as a series of equal payments (annuity). Therefore, the present value of a single amount table is used for each payment to find their total present value, which represents the cash equivalent price of the machine.
Learning Objectives
- Acquire knowledge on the concept of present value and its employment in managing accounts for long-term obligations and capital assets.