A Firm Acquired Used Equipment on January 1^st, 2014 by Issuing

A firm acquired used equipment on January 1^st, 2014 by issuing a note calling for four equal payments to be made each December 31 starting in 2014. The note's principal value equals the negotiated price of $40,000, and the interest rate implied in the note is consistent with the market rate of interest for this level of risk (8%) . What is the net present value of the note payable as on January 1^st, 2014?

A) $11,182
B) $12,077
C) $10,987
D) $37,037

Correct Answer:

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