ohn and Sally Claussen are contemplating the purchase of a hardware store from John Duggan. The Claussens anticipate that the store will generate cash flows of $75,000 per year for 20 years. At the end of 20 years, they intend to sell the store for an estimated $450,000. The Claussens will finance the investment with a variable rate mortgage. Interest rates will increase twice during the 20-year life of the mortgage. Accordingly, the Claussens desired rate of return on this investment varies as follows:

Years 15		7	%
Years 610		9	%
Years 1120		11	%

Required:

What is the maximum amount the Claussens should pay John Duggan for the hardware store? (Assume that all cash flows occur at the end of the year.) (UsePV of $1andPVA of $1)(Round "PV Factors" to 5 decimal places, intermediate and final answer to the nearest dollar amount.)

2.)

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:

1.	Pay $1,010,000 in cash immediately.
2.	Pay $431,000 immediately and the remainder in 10 annual installments of $91,000, with the first installment due in one year.
3.	Make 10 annual installments of $153,000 with the first payment due immediately.
4.	Make one lump-sum payment of $1,720,000 five years from date of purchase.

Required:

a.	Assuming that Harding can borrow funds at an 11% interest rate, determine the present value. (UsePV of $1,PVA of $1, andPVAD of $1)(Round "PV Factors" to 5 decimal places and final answers to the nearest dollar amount.)

Alternative	PV
1	$
2	$
3	$
4	$

b.	Which is the best alternative for Harding?
	Alternative 1 Alternative 2 Alternative 3 Alternative 4

Maximum purchase price

$