Using the previous table, enter the correct factor for three periods at 5%: Periodic payment x Factor = Present value $6,000 x 2.723 = $16,338 The controller at Ringer 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 Ringer 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.) Assume that the actual cost of the machine is $18,000. Weighing the present value of the benefits against the cost of the machine, should Ringer purchase this piece of machinery? Yes

1. Table 2 - Present Value of an Ordinary Annuity of $1 at Compound Interest
   Period	5%	6%	7%	8%	9%	10%	11%	12%
   1	0.952	0.943	0.935	0.926	0.917	0.909	0.901	0.893
   2	1.859	1.833	1.808	1.783	1.759	1.736	1.713	1.690
   3	2.723	2.673	2.624	2.577	2.531	2.487	2.444	2.402
   4	3.546	3.465	3.387	3.312	3.240	3.170	3.102	3.037
   5	4.329	4.212	4.100	3.993	3.890	3.791	3.696	3.605
   6	5.076	4.917	4.767	4.623	4.486	4.355	4.231	4.111
   7	5.786	5.582	5.389	5.206	5.033	4.868	4.712	4.564
   8	6.463	6.210	5.971	5.747	5.535	5.335	5.146	4.968
   9	7.108	6.802	6.515	6.247	5.995	5.759	5.537	5.328
   10	7.722	7.360	7.024	6.710	6.418	6.145	5.889	5.650
   11	8.306	7.887	7.499	7.139	6.805	6.495	6.207	5.938
   12	8.863	8.384	7.943	7.536	7.161	6.814	6.492	6.194
   13	9.394	8.853	8.358	7.904	7.487	7.103	6.750	6.424
   14	9.899	9.295	8.745	8.244	7.786	7.367	6.982	6.628
   15	10.380	9.712	9.108	8.559	8.061	7.606	7.191	6.811
   16	10.838	10.106	9.447	8.851	8.313	7.824	7.379	6.974
   17	11.274	10.477	9.763	9.122	8.544	8.022	7.549	7.120
   18	11.690	10.828	10.059	9.372	8.756	8.201	7.702	7.250
   19	12.085	11.158	10.336	9.604	8.950	8.365	7.839	7.366
   20	12.462	11.470	10.594	9.818	9.129	8.514	7.963	7.469