What is the present value index?

label Accounting
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

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

Studypool's Notebank makes it easy to buy and sell old notes, study guides, reviews, etc.
Click to visit
The Notebank
...
May 8th, 2015
...
May 8th, 2015
Sep 21st, 2017
check_circle
Mark as Final Answer
check_circle
Unmark as Final Answer
check_circle
Final Answer

Secure Information

Content will be erased after question is completed.

check_circle
Final Answer