Question
A) Central Service & Supply is purchasing a piece of equipment that costs $1.1 million. The piece of equipment won't be ready for 1 year.
A) Central Service & Supply is purchasing a piece of equipment that costs $1.1 million. The piece of equipment won't be ready for 1 year. 40% of the purchase must be paid up front with the other 60% due in 1 year. How much money must Central Service & Supply pay now? With the other 60% due in a year and a discount rate of 15%, how much money will they need to also have to invest to be able to make the purchase in full one year from now?
B) Central Service & Supply has sold the piece of equipment they purchased in A). The sale price is $1,474,000. The customer will pay $474,000 up front (period 0). The customer signs a contract to pay $500,000 per year for the next 2 years. What is the total present value of the sale with the same 15% discount rate?
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