Chang Consulting. Inc., has a $15,000 overdue debt with Supplier No. 1. The company is low on cash, with only $4,000 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 $4,000 now and $18.750 when some large projects are finished, two years from today.
Option 2: Pay $25,000 three years from today, when even larger projects are finished.
Assuming that the only factor in the decision is the cost of money (8%), which option should Clary choose?
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