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 $80,000 and therefore has the following payment options: Option 1. Option 2 Option 3 Req 1A Payment Payment in One Year Today $80,000 40,000 Required: 1-a. Assuming an annual discount rate of 11% , calculate the present value and the total cost. 1-b. Which option's cost has the lowest present value? Complete this question by entering your answers in the tabs below. Option 1 Option 2 Option 3 Req 1B $ Assuming an annual discount rate of 11%, calculate the present value and the total cost. Note: Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Payment Today $0 44,000 92,000 80,000 40,000 0 Total Payment $ 80,000 84,000 92,000 Present Value of Payment in One Year $ Total Present Value (or Total Cost) 80,000.00 or s < Req 1A Req 1B >
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 $80,000 and therefore has the following payment options: Option 1. Option 2 Option 3 Req 1A Payment Payment in One Year Today $80,000 40,000 Required: 1-a. Assuming an annual discount rate of 11% , calculate the present value and the total cost. 1-b. Which option's cost has the lowest present value? Complete this question by entering your answers in the tabs below. Option 1 Option 2 Option 3 Req 1B $ Assuming an annual discount rate of 11%, calculate the present value and the total cost. Note: Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Payment Today $0 44,000 92,000 80,000 40,000 0 Total Payment $ 80,000 84,000 92,000 Present Value of Payment in One Year $ Total Present Value (or Total Cost) 80,000.00 or s < Req 1A Req 1B >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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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 $80,000 and therefore has the following payment options:
Option 1
Option 2
Option 3
Req 1A
Payment Payment in One
Today
Year
$ 80,000
40,000
Required:
1-a. Assuming an annual discount rate of 11%, calculate the present value and the total cost.
1-b. Which option's cost has the lowest present value?
Option 1
Option 2
Option 3
Complete this question by entering your answers in the tabs below.
$
Req 1B
$0
44,000
92,000
Assuming an annual discount rate of 11%, calculate the present value and the total cost.
Note: Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places. (FV of $1, PV of $1, FVA of $1,
and PVA of $1)
Payment
Today
Total
Payment
$ 80,000
84,000
92,000
80,000
40,000
0
Present Value of
Payment in One Year
$
Total Present Value
(or Total Cost)
80,000.00
o s
< Req 1A
Req 1B >
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