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 $1,080,000 in cash immediately. 2. Pay $400,000 immediately and the remainder in 10 annual installments of $82,000, with the first installment due in one year. 3. Make 10 annual installments of $140,000 with the first payment due immediately. 4. Make one lump-sum payment of $1,610,000 five years from date of purchase. Required: Determine the best alternative for Hard Hat, assuming that Hard Hat can borrow funds at a(n) 8% interest rate. Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1)

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
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Option 1
Option 2
Option 3
Option 4
The best alternative for Hard Hat
PV
Transcribed Image Text:Option 1 Option 2 Option 3 Option 4 The best alternative for Hard Hat 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 $1,080,000 In cash immediately.
2. Pay $400,000 immediately and the remainder in 10 annual installments of $82,000, with the first installment due in one year.
3. Make 10 annual installments of $140,000 with the first payment due immediately.
4. Make one lump-sum payment of $1,610,000 five years from date of purchase.
Required:
Determine the best alternative for Hard Hat, assuming that Hard Hat can borrow funds at a(n) 8% interest rate.
Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (EV of $1. PV of $1.
EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1)
Transcribed Image Text: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 $1,080,000 In cash immediately. 2. Pay $400,000 immediately and the remainder in 10 annual installments of $82,000, with the first installment due in one year. 3. Make 10 annual installments of $140,000 with the first payment due immediately. 4. Make one lump-sum payment of $1,610,000 five years from date of purchase. Required: Determine the best alternative for Hard Hat, assuming that Hard Hat can borrow funds at a(n) 8% interest rate. Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1)
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