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End of Year Option 1 Option 2 Option 3 0 $0 $0 $0 1 2,000 Q R 2 2,000 2 Q (1.2) R 3 2,000

End of Year

Option 1

Option 2

Option 3

0

$0

$0

$0

1

2,000

Q

R

2

2,000

2Q

(1.2)R

3

2,000

3Q

(1.2)2R

4

2,000

4Q

(1.2)3R

5

2,000

5Q

(1.2)4R

K Company wishes to give its customers three options on payments for office equipment when the initial purchase price is over a certain amount. For example, the following three payment plans are options on a typical purchase, and K wants to be sure they are equivalent at a their TVOM of 14%. Determine the values of Q and R.

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