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You are the controller for Carla Vista's Pizzeria Inc. (CPI). Carla Vista is contemplating the purchase of a new commercial pizza oven in his popular
You are the controller for Carla Vista's Pizzeria Inc. (CPI). Carla Vista is contemplating the purchase of a new commercial pizza oven in his popular Southern Ontario pizzeria and is asking for your assistance in making his decision. From the options presented by his creditor, he has narrowed down his options as follows: Option 1: Purchase the pizza oven with payments of $11,400 made semi-annually for 3 years. The interest rate on this arrangement is 6%. Option 2: Purchase the pizza oven with annual payments for 3 years of $23,800 at 7% interest. For each of the two options, using tables, a financial calculator or Excel function determine from a quantitative perspective, which of the two options should be pursued by Carla Vista? (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, eg. 5,275.25.) Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Option 1: Present value $ 61756 Option 2: Present value $ 62459 Carla Vista should pursue Option 1
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