Hard Hat Company is in the process of purchasing several large pieces of equipment from Machine Corporation. Several financing alternatives have been offered by Machine: 1. Pay $1,120,000 in cash immediately. 2. Pay $400,000 immediately and the remainder in 12 annual installments of $86,000, with the first installment due in one year. 3. Make 12 annual installments of $130,000 with the first payment due immediately. 4. Make one lump-sum payment of $1,700,000 six years from date of purchase. Required: Determine the best alternative for Hard Hat, assuming that Hard Hat can borrow funds at a(n) 7% interest rate. Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. EV of $1, PVA of $1. FVAD of $1 and PVAD of $1) Option 1 Option 2 Option 3 Option 4 PV
Hard Hat Company is in the process of purchasing several large pieces of equipment from Machine Corporation. Several financing alternatives have been offered by Machine: 1. Pay $1,120,000 in cash immediately. 2. Pay $400,000 immediately and the remainder in 12 annual installments of $86,000, with the first installment due in one year. 3. Make 12 annual installments of $130,000 with the first payment due immediately. 4. Make one lump-sum payment of $1,700,000 six years from date of purchase. Required: Determine the best alternative for Hard Hat, assuming that Hard Hat can borrow funds at a(n) 7% interest rate. Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. EV of $1, PVA of $1. FVAD of $1 and PVAD of $1) Option 1 Option 2 Option 3 Option 4 PV
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:Hard Hat Company is in the process of purchasing several large pieces of equipment from Machine Corporation. Several financing
alternatives have been offered by Machine:
1. Pay $1,120,000 in cash immediately.
2. Pay $400,000 immediately and the remainder in 12 annual installments of $86,000, with the first installment due in one year.
3. Make 12 annual installments of $130,000 with the first payment due immediately.
4. Make one lump-sum payment of $1,700,000 six years from date of purchase.
Required:
Determine the best alternative for Hard Hat, assuming that Hard Hat can borrow funds at a(n) 7% interest rate.
Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. FVA
of $1, PVA of $1, EVAD of $1 and PVAD of $1)
Option 1
Option 2
Option 3.
Option 4
The best alternative for Hard Hat
PV
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