Acompany borrowed cash from the bank by signing a 5-year, 8% installment note. the present value of an annuity factor at 8% for 5 years is 3.9927. the present value of a single sum at 8% for 5 years is .6806. each annual payment equals $75,000. the present value of the note is:

Present Value of he note 937,525

Explanation:

We do factor times annuity to get the PV of the annuity

3.9927 x 75,000 = 299,452.5

Then, we do payment over rate to know which principal generates this amount of interest

75,000/0.08 = principal = 937,500

And then we calcualte the PV of paying the principal  in the future

937,500 x .6806 =638,062.5

Last step, we add both values together.

Principal present value 638,062.5 + Annuity Present value 299,452.5

Present Value of he note 937,525

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