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?

Result

a =  45935.8 USD

Solution:

$q=4.12 \%=1 + \dfrac{ 4.12 }{ 100 }=1.0412 \ \\ \ \\ a=21500 \cdot \ q + 23550=21500 \cdot \ 1.0412 + 23550=\dfrac{ 229679 }{ 5 }=45935.8 \ \text{USD} \ \\ a < 46000$

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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.

6 months ago  Like

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