Comparison of Alternatives On January 1, 2010, Chen Yu’s Offi ce Supply Store plans to remodel the store and install new display cases. Chen has the following options of payment. Chen’s interest rate is 8%.

a. Pay $180,000 on January 1, 2010.

b. Pay $196,200 on January 1, 2011.

c. Pay $220,500 on January 1, 2012.

d. Make four annual payments of $55,000 beginning on December 31, 2010.

Required Which option should he choose? (Hint: Calculate the present value of each option as of January 1, 2010.)

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