Postal Express is considering the purchase of a new sorting machine. The sales quote consists of quarterly payments of $37,200 for five years at 76 percent interest. What is the purchase price? a. $621,380.92 b. $614,184.40 c. $687,418.22 d. $774,311.28 e. $836,26735

Question

Marley Jarvis

Business

29 July, 17:02

Postal Express is considering the purchase of a new sorting machine. The sales quote consists of quarterly payments of $37,200 for five years at 76 percent interest. What is the purchase price? a. $621,380.92 b. $614,184.40 c. $687,418.22 d. $774,311.28 e. $836,26735

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Chivas · Answer 1

b. $614,184.40

Explanation:

Quarterly Payment = PMT = $37,400

Interest Rates = r = 7.6% per year = 0.076 per year = 0.076 / 4 = 0.019 per quarter

Number of years = 5 years

Number of Payment = n = 5 years x 4 quarters per year = 20 quarters

PV = PMT x (1 - [1 / (1 + r) ^n]) / r

PV = $37,200 x (1 - [1 / (1 + 0.019) ^20]) / 0.019

PV = $614,184.40