Harding Company is in the process of purchasing several large pieces of equipment from Danning...
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Harding Company is in the process of purchasing several large pieces of equipment from Danning Machine Corporation. Several financing alternatives have been offered by Danning: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
1.
Pay $1,120,000 in cash immediately.
2.
Pay $430,000 immediately and the remainder in 12 annual installments of $81,000, with the first installment due in one year.
3.
Make 12 annual installments of $130,000 with the first payment due immediately.
4.
Make one lump-sum payment of $1,600,000 five years from date of purchase.
Required:
Determine the present value, assuming that Harding can borrow funds at an 7% interest rate.
Determine the best alternative for Harding.
Option 1
Option 2
Option 3
Option 4
References
eBook & Resources
WorksheetLearning Objective: 06-03 Compute the present value of a single amount.
Difficulty: 2 MediumLearning Objective: 06-07 Compute the present value of an ordinary annuity, an annuity due, and a deferred annuity.
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