A company buys a machine for 512,000, which it agrees to pay for in five equal annual payments, beginning one year after the date of purchase, at an annual interest rate of 4%. Immediately after the second payment, the terms of the agreement are changed to allow the balance due to be paid off in a single payment the next year. What is the final single payment? Solution: 1. Draw the CFD by yourself; 2. First, calculate annual payment amount for the first 2 years: A= P = X( P/A, 4%, 5 * )=12000x 2246 =$ 2695.2 The final payment is the present worth of the 3. unpaid payments. 3. Second, Calculate the single payment amount due at the end of the 3rd year: F=$ 7778.35 A company buys a machine for 512,000, which it agrees to pay for in five equal annual payments, beginning one year after the date of purchase, at an annual interest rate of 4%. Immediately after the second payment, the terms of the agreement are changed to allow the balance due to be paid off in a single payment the next year. What is the final single payment? Solution: 1. Draw the CFD by yourself; 2. First, calculate annual payment amount for the first 2 years: A= P = X( P/A, 4%, 5 * )=12000x 2246 =$ 2695.2 The final payment is the present worth of the 3. unpaid payments. 3. Second, Calculate the single payment amount due at the end of the 3rd year: F=$ 7778.35