Question 4

As CFO of a small manufacturing firm, you have been asked to determine the best financing for the purchase of a new piece of equipment. The vendor is offering repayment options of $8,900 at the end of each year for five years, or no payment for two years followed by one payment of $45,000. The current market rate of interest is 11%. Calculate present value of both options.(For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25.)

		Present Value
Option 1		$
Option 2		$

Which option would you recommend?