# Pay 1060000 in cash immediately 2 pay 466000

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1. Pay \$1,060,000 in cash immediately.2. Pay \$466,000 immediately and the remainder in 10 annual installments of \$81,000, with the firstinstallment due in one year.3. Make 10 annual installments of \$150,000 with the first payment due immediately.4. Make one lump-sum payment of \$1,790,000 five years from date of purchase.Required:a.Assuming that Harding can borrow funds at an 11% interest rate, determine the present value. (UsePVof \$1,PVA of \$1, andPVAD of \$1)(Round "PV Factors" to 5 decimal places and final answers tothe nearest dollar amount.)
b.Which is the best alternative for Harding?
5.Award: 10 out of 10.00 pointsJohn and Sally Claussen are contemplating the purchase of a hardware store from John Duggan. TheClaussens anticipate that the store will generate cash flows of \$77,000 per year for 20 years. At the end of20 years, they intend to sell the store for an estimated \$470,000. The Claussens will finance the investmentwith a variable rate mortgage. Interest rates will increase twice during the 20-year life of the mortgage.Accordingly, the Claussens’ desired rate of return on this investment varies as follows:Years 1–57%Years 6–109%Years 11–2011%Required:What is the maximum amount the Claussens should pay John Duggan for the hardware store? (Assumethat all cash flows occur at the end of the year.) (UsePV of \$1andPVA of \$1)(Round "PV Factors" to 5decimal places, intermediate and final answer to the nearest dollar amount.)Maximum purchase price\$816,097rev: 06_15_2012ReferencesWorksheetLearning Objective: 06-03Compute the present value ofa single amount.Learning Objective: 06-07 Compute the present value of anordinary annuity, an annuity due, and a deferred annuity.John and Sally Claussen are contemplating the purchase of a hardware store from John Duggan. TheClaussens anticipate that the store will generate cash flows of \$77,000 per year for 20 years. At the end of20 years, they intend to sell the store for an estimated \$470,000. The Claussens will finance the investmentwith a variable rate mortgage. Interest rates will increase twice during the 20-year life of the mortgage.Accordingly, the Claussens’ desired rate of return on this investment varies as follows:Years 1–57%