Why the harding can borrow the funds


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 (FV of $1, PV of $1,FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):

1. Pay $1,130,000 in cash immediately.

2.Pay $402,000 immediately and the remainder in 12 annual installments of $90,000, with the first installment due in one year.
3. Make 12 annual installments of $132,000 with the first payment due immediately.
4. Make one lump-sum payment of $1,720,000 six years from date of purchase.

Required:

Determine the present value, assuming that Harding can borrow funds at an 7% interest rate.

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Accounting Basics: Why the harding can borrow the funds
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