Wang has brought you one final loan option from Bank C. Bank C will lend you the $90,000 for the dehuller, but it will not loan the $5,000 for the transportation and installation. Bank C requires a $40,000 payment one year from now, a $30,000 payment in two years, a $20,000 payment in three years, and a final payment of $10,000 in four years. With this option, your firm will have to pay the $5,000 today to transport and install the dehuller. The three options are summarized as follows:

Bank A will loan you the full $95,000 to pay for the dehuller and its transportation and installation but requires four equal payments of $27,500 at the end of each of the next four years.

Bank B will lend you the full $95,000 to pay for the dehuller and its transportation and installation but requires a $10,000 payment one year from now, a $20,000 payment in two years, a $30,000 payment in three years, and a final payment of $49,500 in four years.

Bank C will lend you the $90,000 for the dehuller, but it will not loan the $5,000 for the transportation and installation. Bank C requires a $40,000 payment one year from now, a $30,000 payment in two years, a $20,000 payment in three years, and a final payment of $10,000 in four years. With this option, your firm will have to pay the $5,000 today to transport and install the dehuller.

If you use a discount rate of 4 percent, which bank offers you the best option to pay for the dehuller?

Remember that: The present value of a stream of payments is equal to

The present value of an annuity (stream of equal payments) is equal to

where PV is the present value, FV is the future value(s), i is the discount rate, and n is the number of years.