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Harding Company is in the process of purchasing several large pieces of equipment from Danning...

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Accounting

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 $1,000,000 in cash immediately.
2.

Pay $420,000 immediately and the remainder in 10 annual installments of $80,000, with the first installment due in one year.
3. Make 10 annual installments of $135,000 with the first payment due immediately.
4. Make one lump-sum payment of $1,500,000 five years from date of purchase.

Required:
Determine the present value, assuming that Harding can borrow funds at an 8% interest rate.

Determine the best alternative for Harding.

Option 1
Option 2
Option 3
Option 4

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