Question

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 $1,050,000 in cash immediately.
2. Pay $441,000 immediately and the remainder in 10 annual installments of $92,000, with the first installment due in one year.
3. Make 10 annual installments of $154,000 with the first payment due immediately.
4. Make one lump-sum payment of $1,710,000 five years from date of purchase.

Required:
Determine the best alternative for Harding, assuming that Harding can borrow funds at a 10% interest rate. (Round your final answers to nearest whole dollar amount.)

Answer 1

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