Careful Electric Co. is planning to purchase equip for one of its generating plants. Dealer A has offered to sell the equip at a total cost of 2 mil, including installation. This dealer requires a 6% return and is willing to spread the payments over a 10-year period. Payments are to be made at the end of each year in equal installments.

Dealer B is asking $1.8 million for the same equip and will charge an additional %50K for installation, to be paid when the equip is delivered. Payments can be spread over 10 years, made at the end of each year. The dealer requires an 8% return.

A. Calculate the amount of the annual payments require by each dealer. Round to the nearest whole dollar.

B. Determine the projected total cash flow under each option.

C. If careful could pay cash for the new equip how much money would it save under each option.

D. Which option should be chosen?