This problem is an example of an Annuity due problem. To
solve this problem, let us recall that the formula for Annuity due is:
PV = A [[1 – [1 / (1 + r)^n]] / r] * (1 + r)
Where the variables are,
PV = Present value or the purchase price today
A = Annuity value = $24,000
r = Discount rate = 8.5 % = 0.085
Substituting the given values to the equation:
PV = 24,000 [[1 – [1 / (1.085)^25]] / 0.085] * (1.085)
PV = 24,000 * 11.104097
PV = $266,498.3279
Therefore the purchase price is about $266,498.
