New Med Corporation is a rapidly growing biotech company that has a required rate of return of $12\%.$ It plans to build a new facility in Santa Clara County. The building will take $2$ years to complete.

The building contractor offered New Med a choice of three payment plans, as follows:

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Present Value of $$1$ table

Present Value of Annuity of $$1$ table

Future Value of $$1$ table

Future Value of Annuity of $$1$ table

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Plan I: Payment of $$150,000$ at the time of signing the contract and $$4,575,000$ upon

completion of the building. The end of the second year is the completion date.

Plan II: Payment of $$1,775,000$ at the time of signing the contract and $$1,775,000$ at the end of

each of the two succeeding years.

Plan III: Payment of $$450,000$ at the time of signing the contract and $$1,575,000$ at the end of

each of the three succeeding years.

Requirements

Using the net present value method, calculate the comparative cost of each of the three payment

plans being considered by New Med.

Which payment plan should New Med choose? Explain.

Discuss the financial factors, other than the cost of the plan, and the nonfinancial factors that

should be considered in selecting an appropriate payment plan.New MedNew Med Corporation is a rapidly growing biotech company that has a required rate of return of $1212\%.$ It plans to build a new facility in Santa Clara County. The building will take $2$ years to complete. The building contractor offered New MedNew Med a choice of three payment$$ plans, as$$ follows: