On July 1, 2012, Ed Wynne signed an agreement to operate as a franchisee of Kwik Foods,

Question:

On July 1, 2012, Ed Wynne signed an agreement to operate as a franchisee of Kwik Foods, Inc., for an initial franchise fee of $240,000. Of this amount, $80,000 was paid when the agreement was signed and the balance is payable in four equal annual payments of $40,000 beginning July 1, 2013. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. Wynne's credit rating indicates that he can borrow money at 14% for a loan of this type.
Information on present and factors is as follows:
Present value of 1 at 14% for 4 periods 0.59
Future value of 1 at 14% for 4 periods 1.69
Present value of an ordinary of 1 at 14% for 4 periods 2.91
Wynne should record the acquisition cost of the franchise on July 1, 2012 at
A) $174,400
B) $270,400
C) $196,400
D) $240,000

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,... Future Value
Future value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth...