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

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter19: Lease Financing

Section: Chapter Questions

Problem 1P: Reynolds Construction (RC) needs a piece of equipment that costs 200. RC can either lease the...

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Can you help with attached question, thank you in advance.
2 values needed - in the Building and Equipment fields.
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Option E) is incorrect . Please solve correctly
Instructions: Read the case setup. Populate the tables if helpful (you are NOT required to submit the tables nor this case setup) and answer the question(s) in the corresponding test in Blackboard. An investor is performing a financial analysis on a $65,000,000 (all-in acquisition price) apartment building. 1. Calculate the expected IRR based on the following operating and resale cash flows: IRR PV Total Operating PV Operating PV Resale Partition: Resale Value Cash Flow Cash Flow Cash Flow Cash Flow Year 0 -$65,000,000 $ $ $ Year 1 $3,250,000 $3,300,000 $3,500,000 Year 2 Year 3 $3,600,000 $3,700,000 Year 4 Year 5 $83,000,000 Totals $17,350,000 $83,000,000 % Allocation % 2. Partition the IRR. What % of the IRR is attributable to the property's operating cash flows, and what % is attributable to the property's resale? 3. If the investor can deploy its capital into a comparable property that generates 85% of its expected IRR from its property resale, all else equal, which property should…
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Use the following data on Table 3 to decide should the Company lease or purchase the new production line. The PV of the costs of the purchase decision is $72,450. a. Must not lease the equipment because the cost of lease is $114,155 b. Must lease the equipment because the cost of lease is $69,756 C. Must lease the equipment because the cost of lease is $55,000 d. Must not lease the equipment because the cost of lease is $75,000 Table 3: Annual Payment* Tax rate Rental Period (years) Cost of Borrowing (before tax) Payments are due at the beginning of each year $ 25,000 40% 5 9.50%
CengageNOWv2| Online teachin X N2.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=D&inpro... Differential Analysis Involving Opportunity Costs On July 1, Coastal Distribution Company is considering leasing a building and buying the necessary equipment to operate a public w Alternatively, the company could use the funds to invest in $149,100 of 6% U.S. Treasury bonds that mature in 16 years. The bond at face value. The following data have been assembled: Cost of store equipment $149,100 Life of store equipment 16 years Estimated residual value of store equipment $18,600 Yearly costs to operate the warehouse, excluding depreciation of equipment $55,900 Yearly expected revenues-years 1-8 75,600 Yearly expected revenues-years 9-16 70,100 Required: 1. Prepare a differential analysis as of July 1 presenting the proposed operation of the warehouse for the 16 years (Alternative 1) a investing in U.S. Treasury bonds (Alternative 2). If an amount is…
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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 $1,130,000 in cash immediately.2. Pay $402,000 immediately and the remainder in 12 annual installments of $90,000, with the first installment due in one year.3. Make 12 annual installments of $132,000 with the first payment due immediately.4. Make one lump-sum payment of $1,720,000 six years from date of purchase. Required:Determine the best alternative for Harding, assuming that Harding can borrow funds at a 7% interest rate. Option1 PV ? Option 2 PV ? Option 3 PV ? Option 4 PV ?
3. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $9,000,000, and it will be depreciated on a straight-line basis over a period of six years (years 1–6). • The old machine is also being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. • Replacing the old machine will require an investment in net working capital (NOWC) of $50,000 that…
NPV-Mutually exclusive projects Hook Industries is considering the replacement of one of its old metal stamping machines. Three alternative replacement machines are under consideration. The cash flows associated with each are shown in the following table: 13%. a. Calculate the net present value (NPV) of each press. b. Using NPV, evaluate the acceptability of each press. c. Rank the presses from best to worst using NPV. d. Calculate the profitability index (PI) for each press. e. Rank the presses from best to worst using Pl. a. The NPV of press A is $ (Round to the nearest cent.) Data table (Click on the icon here into a spreadsheet.) Initial investment (CF) Year (t) 1 234 5 in order to copy the contents of the data table below 678 Machine A $85,000 $17,700 $17,700 $17,700 $17,700 $17,700 $17,700 $17,700 $17,700 Print Machine B $60,100 Cash inflows (CFt) $11,900 $13,700 $16,400 $18,400 $20,400 $25,100 Done Machine C $130,100 $50,200 $29,900 $20,400 $19,700 $20,200 $30,000 $40,500…