Lux Resources is due to pay one vendor $35 000 in one year, $50 000 in two years, and $30000 in three years. Instead of making those payments, the company has agreed to make two equal payments, one payment to be made in six months and a second payment in 1 1⁄2 years. Money is worth 6% compounded monthly. The decision, and therefore the focal date, is to be today.
a. Calculate the equivalent value at the focal date of the original three payments.
b. Calculate the amount of each of the equal payments.