Question Content AreaRalston Consulting, Inc., has a $48,000 overdue debt with Supplier No. 1. The company is low on cash, with only $13,440 in the checking account and does not want to borrow any more cash. Supplier No. 1 agrees to settle the account in one of two ways:Option 1: Pay $13,440 now and $45,600 when some large projects are finished, two years from today.Option 2: Pay $67,200 three years from today, when even larger projects are finished. Assuming that the only factor in the decision is the cost of money (10%).(Click here to see present value and future value tables)A. Calculate the present value of each option. Round your present value factor to three decimal places and final answer to the nearest dollar.Present value of Option 1$fill in the blank 1Present value of Option 2$fill in the blank 2B. Which option should Ralston choose?

In the given case both alternatives will be compared and the alternative that involves lower present…

Answered: Ralston Consulting, Inc., has a $48,000…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Ralston Consulting, Inc., has a $48,000 overdue debt with Supplier No. 1. The company is low on cash, with only $13,440 in the checking account and does not want to borrow any more cash. Supplier No. 1 agrees to settle the account in one of two ways:

Option 1: Pay $13,440 now and $45,600 when some large projects are finished, two years from today.

Option 2: Pay $67,200 three years from today, when even larger projects are finished. Assuming that the only factor in the decision is the cost of money (10%).
(Click here to see present value and future value tables)
A. Calculate the present value of each option. Round your present value factor to three decimal places and final answer to the nearest dollar.

Present value of Option 1 $fill in the blank 1

Present value of Option 2 $fill in the blank 2

B. Which option should Ralston choose?

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