Problem 5-3 (Algo) Analysis of alternatives [LO5-3, 5-8] 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.) X Answer is complete but not entirely correct. PV Option 1 $ 1,210,000 X Option 2 632,122 X Option 3 2$ 1,127,285 X Option 4 2$ 1,190,693 8 The best alternative for Harding Option 4
Problem 5-3 (Algo) Analysis of alternatives [LO5-3, 5-8] 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.) X Answer is complete but not entirely correct. PV Option 1 $ 1,210,000 X Option 2 632,122 X Option 3 2$ 1,127,285 X Option 4 2$ 1,190,693 8 The best alternative for Harding Option 4
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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I used the PV of $1 chart to find my numbers but I got them all wrong. Can I have help please ?
![Problem 5-3 (Algo) Analysis of alternatives [LO5-3, 5-8]
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 $1,670,000 five years from date of purchase.
Required:
Determine the best alternative for Harding, assuming that Harding can borrow funds at a 8% interest rate. (Round your final answers
to nearest whole dollar amount.)
* Answer is complete but not entirely correct.
PV
Option 1
1,210,000 X
Option 2
632,122 X
Option 3
Option 4
2$
1,127,285 X
1,190,693 X
The best alternative for Harding
Option 4](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3e1bfd6a-3cb6-4031-858f-4ba8da8545b1%2F2ffcbb14-7397-498e-ad1c-442222a182ed%2Fvlmwjhd_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 5-3 (Algo) Analysis of alternatives [LO5-3, 5-8]
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 $1,670,000 five years from date of purchase.
Required:
Determine the best alternative for Harding, assuming that Harding can borrow funds at a 8% interest rate. (Round your final answers
to nearest whole dollar amount.)
* Answer is complete but not entirely correct.
PV
Option 1
1,210,000 X
Option 2
632,122 X
Option 3
Option 4
2$
1,127,285 X
1,190,693 X
The best alternative for Harding
Option 4
Expert Solution
Step 1
Present value helps in determining to know present value of money to future value to be received it helps in determining best alternative for future .
i have attached excel images for best explanation hope it helps
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