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 $1,130,000 in cash immediately.
2. Pay $402,000 immediately and the remainder in 12 annual installments of $90,000, with the first installment due in one year.
3. Make 12 annual installments of $132,000 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) 7% interest rate.