Plan I Payment of $200,000 at the time of signing the contract and $4,650,000 upon completion of the building. The end of the second year is the completion date.

Plan II Payment of $1,625,000 at the time of signing the contract and $1,625,000 at the end of each of the two succeeding years.

Plan III Payment of $225,000 at the time of signing the contract and $1,550,000 at the end of each of the three succeeding years.

Requirement 1. Using the net present valuemethod, calculate the comparative cost of each of the three payment plans being considered by NewTech.

The net present value cost of Plan I is:

.

The net present value cost of Plan II is :

.

The net present value cost of Plan III is :

.

Requirement 2. Which payment plan should NewTech choose? Explain.

Based on the financialcriteria, NewTech should choose ______

Plan II

Plan III

Plan I

Since it has the which of the following_______ net present value cost.

highest

lowest