Drilling machine

A manufacturing firm purchased a heavy duty drilling machine. They were given two payment options:
Option 1: Make a payment of $46,000 immediately to settle the invoice for the machine.
Option 2: Make a payment of $21,500 immediately and the balance of $23,550 in 3 months to settle the invoice.
If money is worth 4.12% compounded quarterly, answer the following:
What is the total present value of Option 2?

Correct answer:

a =  45935.8 USD

Step-by-step explanation:

$$\begin{gathered} q=4.12\mathrm{\%}=1+{\displaystyle \frac{4.12}{100}}=1.0412 \\ a=21500\cdot q+23550=21500\cdot 1.0412+23550={\displaystyle \frac{229679}{5}}=45935.8={\displaystyle \frac{229679}{5}}\text{ USD}=45935.8\text{ USD } \\ a<46000 \end{gathered}$$

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Dr Math

From our user:

Hi Peter,

Thank you for your time, I have checked your answer and it is still showing as wrong.

1 year ago  Like

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