Question

Using the table provided, if you agree to make three annual payments of $6,000 each for a piece of equipment, with an incremental borrowing rate of 8%, how much will you record the purchase price of the equipment for assuming first you make the annual payment at the end of each year and next you make the annual payment at the beginning of each year.

                PV single sum       3 periods 8% ------------ .79383

                PV single sum       6 periods 4% ------------ .79031

                FV single sum       3 periods 8% ------------ 1.25971

                FV single sum       6 periods 4% ------------ 1.26532

                PV annuity            3 periods 8% ------------ 2.57710

                PV annuity            6 periods 4% ------------ 5.24214

                PV annuity Due     3 periods 8% ------------ 2.78326

                PV annuity Due     6 periods 4% ------------ 5.45182

Answer 1

Annual payment at the end of each year:
Annual payment	6000
X PV annuity            3 periods 8%	2.57710
Purchase price of the equipment	15462.60	or 15463
Annual payment at the beginning of each year:
Annual payment	6000
X PV annuity Due           3 periods 8%	2.78326
Purchase price of the equipment	16699.56	or 16700