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Explain the present worth of the contract

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Reference no: EM133084231

Peloton, Inc. is considering the purchase of a new software for their treadmill product line which improves the user experience. This software comes with a contract option to use at any point during its ownership to aid with technical systems updates and effective data storage management. The company decides that it will go without this contract for the first 4 years of ownership, planning to begin utilizing it on year 5 and continue through year 8 - where at this time they plan to make another system upgrade. The cost of this contract is $4,500 per year, assumed Peloton rate of return is 9% per year

a) What will be the present worth of the contract?

b) What will be the future worth of the contract?

c) If Peloton wishes to pre-pay the contract with uniform payments in years one - four only, what will be the amount of each payment.?

d) What will be the equivalent uniform annual amount of the contract in years one through eight?

Reference no: EM133084231

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