Hard Hat Company is in the process of purchasing several large pieces of equipment from Machine Corporation. Several financing alternatives have been offered by Machine:

1. Pay $1,070,000 in cash immediately.
2. Pay $400,000 immediately and the remainder in 12 annual installments of $80,000, with the first installment due in one year.
3. Make 12 annual installments of $130,000 with the first payment due immediately.
4. Make one lump-sum payment of $1,720,000 six years from date of purchase.

Required:

Determine the best alternative for Hard Hat, assuming that Hard Hat can borrow funds at a(n) 8% interest rate.

Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

PVOption 1$1,070,000

Option 2

Option 3

Option 4

The best alternative for Hard Hat?