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ACC 307 7-2 Homework 4 - Harding Company is in the process...

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Harding Company is in the process of purchasing several large pieces of equipment from DanningMachine Corporation. Several financing alternatives have been offered by Danning:1.Pay $1,030,000 in cash immediately.2.Pay $470,000 immediately and the remainder in 10 annual installments of $85,000, with the firstinstallment due in one year.3.Make 10 annual installments of $147,000 with the first payment due immediately.4.Make one lump-sum payment of $1,640,000 five years from date of purchase.
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Unformatted text preview:Required: a. Assuming that Harding can borrow funds at an 9% interest rate, determine the present value. (Use PV of $1 , PVA of $1 , and PVAD of $1 ) (Round "PV Factors" to 5 decimal places and final answers to the nearest dollar amount.) Alternative PV 1 $ 1,030,000 2 $ 1,015,501 3 $ 1,028,302 4 $ 1,065,885 b. Which is the best alternative for Harding? Alternative 2