New Techno Corporation is a rapidly growing biotech company that
has a required rate of return of 12?%. It plans to build a new
facility in Santa Clara County. The building will take 2 years to
complete. The building contractor offered New Techno a choice of
three payment? plans, as? follows
Plan? I: Payment of $250,000 at the time of
signing the contract and $4,575,000 upon completion of the
building. The end of the second year is the completion date. |
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Plan? II: Payment of $1,575,000 at the time of
signing the contract and $1,575,000 at the end of each of the 2
succeeding years. |
times
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requirement
Using
the net present value method, calculate the comparative cost of
each of the three payment plans being considered by
New TechnoNew Techno.
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2.
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Which
payment plan should
New TechnoNew Techno
?choose? Explain. |
3.
Requirement 1. Using the net present value?
method, calculate the comparative cost of each of the three payment
plans being considered by
New TechnoNew Techno.
?(Round your final answers to the nearest whole? dollar.)
The net present value cost of Plan I is $
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.
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The net present value cost of Plan II is $
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.
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The net present value cost of Plan III is $
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.
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Requirement 2. Which payment plan should
New TechnoNew Techno
?choose? Explain.Based on the financial? criteria,
New TechnoNew Techno
should choose PLAN 1,2,3,
?
Plan I
Plan II
Plan III
since it has the Lowest/highest
?
highest
lowest
net present value cost.
Requirement 3. Discuss the financial? factors,
other than the cost of the?plan, and the nonfinancial factors that
should be considered in selecting an appropriate payment plan.
Begin by selecting two financial factors that should be
considered in selecting an appropriate payment plan.
Now select two nonfinancial factors that should be considered in
selecting an appropriate payment plan.
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Discuss the financial? factors, other than the cost of the?plan,
and the nonfinancial factors that should be considered in selecting
an appropriate payment plan.
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Plan? III: Payment of $325,000at the time of
signing the contract and $1,475,000
at the end of each of the 3 succeeding years.
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