Answer:
Bart Inc.
The initial value of the machine is:
= $114,240.
Explanation:
a) Data and Calculations:
Date of purchase of machine from Fell Corp. = December 31, 2016
Annual payments for a non-interest-bearing note = $20,000
Appropriate present value of the annuity due = 5.712
PV of the annual payments for 8 years = $114,240 ($20,000 * 5.712)
First payment date = December 31, 2016
Period of payments = 8 years
Prevailing interest rate for this type of note = 11%
Check from an online financial calculator:
N (# of periods) 8
I/Y (Interest per year) 11
PMT (Periodic Payment) 20000
FV (Future Value) 0
Results
PV = $114,243.93
Sum of all periodic payments = $160,000.00
Total Interest = $45,756.07
