The controller at Bolden has determined that the company could save $4,000 per year in engineering costs by purchasing a new machine. The new machine would last 10 years and provide the aforementioned annual monetary benefit throughout its entire life. Assuming the interest rate at which Bolden purchases this type of machinery is 10%, what is the maximum amount the company should pay for the machine?______ $ (Hint: This is basically a present value of an ordinary annuity problem as highlighted above.)

Problem Information 1:

Using the previous table, enter the correct factor for three periods at 5%:

Periodic payment x Factor = Present value

$6,000x 2.723= $16,338

Previous Table:

Table 2 - Present Value of an Ordinary Annuity of $1 at Compound Interest

Period5%6%7%8%9%10%11%12%

10.9520.9430.9350.9260.9170.9090.9010.893

21.8591.8331.8081.7831.7591.7361.7131.690

32.7232.6732.6242.5772.5312.4872.4442.402

43.5463.4653.3873.3123.2403.1703.1023.037

54.3294.2124.1003.9933.8903.7913.6963.605

65.0764.9174.7674.6234.4864.3554.2314.111

75.7865.5825.3895.2065.0334.8684.7124.564

86.4636.2105.9715.7475.5355.3355.1464.968

97.1086.8026.5156.2475.9955.7595.5375.328

107.7227.3607.0246.7106.4186.1455.8895.650

118.3067.8877.4997.1396.8056.4956.2075.938

128.8638.3847.9437.5367.1616.8146.4926.194

139.3948.8538.3587.9047.4877.1036.7506.424

149.8999.2958.7458.2447.7867.3676.9826.628

1510.3809.7129.1088.5598.0617.6067.1916.811

1610.83810.1069.4478.8518.3137.8247.3796.974

1711.27410.4779.7639.1228.5448.0227.5497.120

1811.69010.82810.0599.3728.7568.2017.7027.250

1912.08511.15810.3369.6048.9508.3657.8397.366

2012.46211.47010.5949.8189.1298.5147.9637.469