Question

__________ would use the present value of an annuity due for which of the following transactions?

a. Noel Inc. rents a warehouse for 7 years with annual rental payments of $120,000 to be made at the end of each year.
b. Noel, Inc. borrows $20,000 and has agreed to pay back the principal plus interest in three years.
c. Noel, Inc. wants to deposit a lump sum to accumulate $50,000 for the construction of a new parking lot in 4 years.
d. Noel, Inc. rents a truck for 5 years with annual rental payments of $20,000 to be made at the beginning of each year.

Answer 1

A and D

Step-by-step explanation:

If a periodic sum is to be paid or received, an annuity must be used since this means a series of uniform payments, therefore in addition to this and the time an interest rate is required to find the present value of the payments you must use in excel PV (present value) function and you need aside these data an interest rate.