Problem
NOTE- I need help understanding how to get the PRESENT VALUE for numbers 3 and 4 of this question- I have already filled in the answer for numbers 1 and 2. Please, show how you arrived at the answer for me so that I can understand how to arrive there myself too- Thank you so much, in advance, :-). (Made #3 and #4 in BOLD)
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 $1,120,000 in cash immediately.
2. Pay $401,000 immediately and the remainder in 10 annual installments of $90,000, with the first installment due in one year.
3. Make 10 annual installments of $150,000 with the first payment due immediately.
4. Make one lump-sum payment of $1,670,000 five years from date of purchase
Required:
Assuming that Harding can borrow funds at an 8% interest rate, determine the present value. (Use PV of $1, PVA of $1, and PVAD of $1).