Lights, Camera, and More sells filmmaking equipment. The company offers three purchase options: (1) pay full cas half down and the remaining one-half plus 10% in one year, or (3) pay nothing down and the full amount plus 15% considering buying equipment from Lights, Camera, and More for $120,000 and therefore has the following paym Option 1 Option 2 Option 3 Payment Payment in One Today Year $ 120,000 60,000 0 $0 66,000 138,000 Total Payment $ 120,000 126,000 138,000 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.
Lights, Camera, and More sells filmmaking equipment. The company offers three purchase options: (1) pay full cas half down and the remaining one-half plus 10% in one year, or (3) pay nothing down and the full amount plus 15% considering buying equipment from Lights, Camera, and More for $120,000 and therefore has the following paym Option 1 Option 2 Option 3 Payment Payment in One Today Year $ 120,000 60,000 0 $0 66,000 138,000 Total Payment $ 120,000 126,000 138,000 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.
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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Question
Transcribed Image Text:ces
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 $120,000 and therefore has the following payment options:
Option 1
Option 2
Option 3
Payment Payment in One
Today
Year
Req 1A
$ 120,000
60,000
0
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.
$0
66,000
138,000
Req 1B
Total
Payment
$ 120,000
126,000
138,000
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
Present Value of
Payment in One Year
Total Present Value
(or Total Cost)
< Reg 1A
Req 1B >
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