Donna Thomas has a $2,800 overdue debt for medical books and supplies at Joe's Bookstore. She has only $970 in her checking account and doesn't want her parents to know about this debt. Joe's tells her that she may settle the account in one of two ways since she can't pay it all now:

1. Pay $970 now and $2,300 when she completes her residency, 2 years from today.

2. Pay $3,770 one year after completion of residency, 3 years from today.

Assuming that the cost of money is the only factor in Donna's decision and that the cost of money to her is 5%, which alternative should she choose? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.) Click here to view factor tables

Present Value of Alternative 1 _____ a dollar amount

Present Value of Alternative 2 _____ a dollar amount

On the present value basis, select an alternative is preferable.