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 $1,210,000 in cash immediately.
2.Pay $471,000 immediately and the remainder in 10 annual installments of $95,000, with the first installment due in one year.
3. Make 10 annual installments of $157,000 with the first payment due immediately.
4. Make one lump-sum payment of $1,740,000 five years from date of purchase.

Required:
Determine the best alternative for Harding, assuming that Harding can borrow funds at a 7% interest rate. (Round your final answers to nearest whole dollar amount.)

	PV
Option 1
Option 2
Option 3
Option 4
The best alternative for Harding

Answer 1