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Mark Grace, Inc. has completed the purchase of new IBM computers. the fair market value of the equipment is $824,150. the purchase agreement specifies an immediate down payment of $200,000 and semi-annual payments of $76,952 beginning at the end of 6 months for 5 years. What is the interest rate to the nearest percent used in discounting this purchase transaction?

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Solution Summary

Calculates the interest rate used for discounting.

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The present value of all payments must be equal to the fair value of the machine= $824,150
Immediate down payment= $200,000
Therefore, remining amount= $624,150 =$824,150-$200,000

The PV of the semi-annual payments must ...

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