Kleer Enterprises Ltd, is negotiating to buy a fully automatic sewing machine. This machine can be programmed to sew and is expected to reduce production time significantly. The inventor of the machine has offered Kamal the choice of a one-time payment of 1,500,000 today or a five-time payment in five years of 385,000.

A. If Kleer has an 8% cost of capital, which form of payment should it choose?

B. What annual payments would make the two offerings equal in value at an 8% cost of capital?

C. Would your answer in part a be different if the annual payments were made at the beginning of the year? Indicates what difference the change in time would make to the present value calculation, if any.

D. The cash inflow after tax associated with this purchase is $240,000 per year for the next 14 years. Will these factors change the company's decision about how to fund the initial investment?