Hard Hat Company is in the process of purchasing several large pieces of equipment from Machine Corporation. Several financing alternatives have been offered by Machine: 1. Pay $1,120,000 in cash immediately. 2. Pay $400,000 immediately and the remainder in 12 annual installments of $86,000, 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 $1,700,000 six years from date of purchase. Required: Determine the best alternative for Hard Hat, assuming that Hard Hat can borrow funds at a(n) 7% interest rate. Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. EV of $1, PVA of $1. FVAD of $1 and PVAD of $1) Option 1 Option 2 Option 3 Option 4 PV

Hard Hat Company is in the process of purchasing several large pieces of equipment from Machine Corporation. Several financing alternatives have been offered by Machine: 1. Pay $1,120,000 in cash immediately. 2. Pay $400,000 immediately and the remainder in 12 annual installments of $86,000, 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 $1,700,000 six years from date of purchase. Required: Determine the best alternative for Hard Hat, assuming that Hard Hat can borrow funds at a(n) 7% interest rate. Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. EV of $1, PVA of $1. FVAD of $1 and PVAD of $1) Option 1 Option 2 Option 3 Option 4 PV

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Mortgages

A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.

Mortgage

The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.

Question

Hard Hat Company is in the process of purchasing several large pieces of equipment from Machine Corporation. Several financing
alternatives have been offered by Machine:
1. Pay $1,120,000 in cash immediately.
2. Pay $400,000 immediately and the remainder in 12 annual installments of $86,000, 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 $1,700,000 six years from date of purchase.
Required:
Determine the best alternative for Hard Hat, assuming that Hard Hat can borrow funds at a(n) 7% interest rate.
Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. FVA
of $1, PVA of $1, EVAD of $1 and PVAD of $1)
Option 1
Option 2
Option 3.
Option 4
The best alternative for Hard Hat
PV

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