Harding Company is in the process of purchasing several large pieces of equipment from Danning Machine Corporation. Several financing alternatives have been offered by Danning: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

1.	Pay $1,120,000 in cash immediately.
2.	Pay $430,000 immediately and the remainder in 12 annual installments of $81,000, 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 $1,600,000 five years from date of purchase.

Required:

Determine the present value, assuming that Harding can borrow funds at an 7% interest rate.

Determine the best alternative for Harding.

	Option 1
	Option 2
	Option 3
	Option 4

References

eBook & Resources

WorksheetLearning Objective: 06-03 Compute the present value of a single amount.

Difficulty: 2 MediumLearning Objective: 06-07 Compute the present value of an ordinary annuity, an annuity due, and a deferred annuity.

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