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 $1,150,000 in cash immediately.
2. Pay $460,000 immediately and the remainder in 12 annual installments of $80,000, with the first installment due in one year.
3. Make 12 annual installments of $135,000 with the first payment due immediately.
4. Make one lump-sum payment of $1,630,000 five years from date of purchase. Required: a. Assuming that Harding can borrow funds at an 7% interest rate, determine the present value. (Use PV of $1, PVA of $1, and PVAD of $1) (Round "PV Factors" to 5 decimal places and final answers to the nearest dollar amount.)
Alternative PV 1 $ 2 $ 3 $ 4 $
b. Which is the best alternative for Harding?
Alternative 1
Alternative 2
Alternative 3
Alternative 4