Lights, Camera, and More sells filmmaking equipment. The company offers three purchase options: (1) pay full cash today, (2) pay one-half down and the remaining one-half plus down and the full amount plus 15% in one year. George is considering buying equipment from Lights, Camera, and More for $150,000 and therefore has the following payment op Option 1 Option 2 Option 3 Payment Today $150,000 75,000 0 Option 1 Payment in One Year $ 0 82,500 172,500 Required: 1-a. Assuming an annual discount rate of 11%, calculate the present value and the total cost. (FV of $1. PV of $1. FVA of $1, and PVA of $1) (Use appropriate factor(s) from the answers to 2 decimal places.) Present Value of Payment in One Year Total Payment $150,000 157,500 172,500 Total Present Value (or Total Cost)
Lights, Camera, and More sells filmmaking equipment. The company offers three purchase options: (1) pay full cash today, (2) pay one-half down and the remaining one-half plus down and the full amount plus 15% in one year. George is considering buying equipment from Lights, Camera, and More for $150,000 and therefore has the following payment op Option 1 Option 2 Option 3 Payment Today $150,000 75,000 0 Option 1 Payment in One Year $ 0 82,500 172,500 Required: 1-a. Assuming an annual discount rate of 11%, calculate the present value and the total cost. (FV of $1. PV of $1. FVA of $1, and PVA of $1) (Use appropriate factor(s) from the answers to 2 decimal places.) Present Value of Payment in One Year Total Payment $150,000 157,500 172,500 Total Present Value (or Total Cost)
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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SOLVE BOTH QUESTIONS ,DO NOT GIVE SOLUTION IN IMAGE
Transcribed Image Text:Lights, Camera, and More sells filmmaking equipment. The company offers three purchase options: (1) pay full cash today, (2) pay one-half down and the remaining one-half plus 10% in one year, or (3) pay nothing
down and the full amount plus 15% in one year. George is considering buying equipment from Lights, Camera, and More for $150,000 and therefore has the following payment options:
Option 1
Option 2
Option 3
Payment Today
$150,000
75,000
0
Option 1
Option 2
Option 3
Payment in
One Year
$ 0
Present Value of
Payment in One
Year
82,500
172,500
Required:
1-a. Assuming an annual discount rate of 11%, calculate the present value and the total cost. (FV of $1. PV of $1. FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your
answers to 2 decimal places.)
Total Payment
$150,000
157,500
172,500
Total Present
Value (or Total
Cost)
1-b. Which option has the lowest total cost in present value terms?
Option 1
Option 2
Option 3
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