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 $401,000 immediately and the remainder in 10 annual installments of $90,000, with the first installment due in one year. 3. Make 10 annual installments of $150,000 with the first payment due immediately. 4. Make one lump-sum payment of $1,670,000 five years from date of purchase. Required: Determine the best alternative for Harding, assuming that Harding can borrow funds at a 8% interest rate. (Round your final answers to nearest whole dollar amount.) Option 1 Option 2 Option 3 Option 4 The best alternative for Harding $ Option 2 PV 1,120,000
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 $401,000 immediately and the remainder in 10 annual installments of $90,000, with the first installment due in one year. 3. Make 10 annual installments of $150,000 with the first payment due immediately. 4. Make one lump-sum payment of $1,670,000 five years from date of purchase. Required: Determine the best alternative for Harding, assuming that Harding can borrow funds at a 8% interest rate. (Round your final answers to nearest whole dollar amount.) Option 1 Option 2 Option 3 Option 4 The best alternative for Harding $ Option 2 PV 1,120,000
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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Transcribed Image Text: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 $401,000 immediately and the remainder in 10 annual installments of $90,000, with the first installment due in one year.
3. Make 10 annual installments of $150,000 with the first payment due immediately.
4. Make one lump-sum payment of $1,670,000 five years from date of purchase.
Required:
Determine the best alternative for Harding, assuming that Harding can borrow funds at a 8% interest rate. (Round your final answers
to nearest whole dollar amount.)
Option 1
Option 2
Option 3
Option 4
The best alternative for Harding
$
Option 2
PV
1,120,000
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