What is the present value index?

Accounting
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The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability in this situation:

May 8th, 2015

the present value index

is the present value of one dollar annuity with specifying interest rate a number of periods.  In this case it is 6% for 5 year, so the present  value index is

1/1.06+ 1/1.06^2+1/1.06^3+1/1.06^4+1/1.06^5 = 4.212.  

May 8th, 2015

I knew it was 4.212 because it says that in the question. The answers are either 1.05, 1.25, 1.00 or .95

May 8th, 2015

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