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Comparison with similar transaction reasonable rate interest

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Amber Mining and Milling inc contracted with Truax Corporation to constructed a custom-made lathe. The machine was completed and ready for use on Jan. 1, 2016. Amber paid for the lathe by issuing a $600,000, three year note that specified 4% interest, payable annually on December 31 of each year. The cash market price of the lathe was unknown. It was determined by comparison with similar transaction that 12% was a reasonable rate of interest?

Reference no: EM131821630

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