Exercise 69 Cullumber Company purchased a machine at a price

Exercise 6-9 Cullumber Company purchased a machine at a price of $92,700 by signing a note payable, which requires a single payment of $136,207 in 5 years. Click here to view factor tables Assuming annual compounding of interest, what rate of interest is being paid on the loan? (Round answer to 0 decimal places, eg, 13%.) Rate of interest

Solution

Future value = $136,207

Present value = $ 92,700

Number of Years = n

Assume X= Rate of interest

Future Value = Present value (1+X)^n

136,207 = 92,700 (1+X)^5

(1+X)^5 =136,207/92,700

(1+X)^5 =1.469331

Future value table shows at 5 years 1.469331 is coincides at 8% rate