Tropical Adventures is negotiating with a naval architect and shipyard in planning the construction of a 90
Question:
Tropical Adventures is negotiating with a naval architect and shipyard in planning the construction of a 90 -foot trimaran that Tropical Adventures expects to acquire and place in charter service. The yacht will be completed and ready for service four years hence. If Tropical Adventures pays for the yacht upon completion (Payment Plan A), it will cost \(\$ 500,500\). However, two alternative payment plans are available. Plan B would require an immediate payment of \(\$ 365,650\). Plan C would require four annual payments of \(\$ 105,850\), the first of which would be made one year hence. In evaluating the three alternatives, the management of Tropical Adventures has decided to assume an interest rate of \(10 \%\).
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Calculate the present value of each payment and indicate which plan Tropical Adventures should follow.
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