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Mandarinka [93]
3 years ago
7

Harding Company is in the process of purchasing several large pieces of equipment from Danning Machine Corporation. Several fina

ncing 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 $1,080,000 in cash immediately. 2.Pay $400,000 immediately and the remainder in 10 annual installments of $82,000, with the first installment due in one year. 3. Make 10 annual installments of $140,000 with the first payment due immediately. 4. Make one lump-sum payment of $1,610,000 five years from date of purchase. Required: Determine the best alternative for Harding, assuming that Harding can borrow funds at a 8% interest rate. (Round your final answers to nearest whole dollar amount.)
Business
1 answer:
Georgia [21]3 years ago
5 0

Answer:

<u>The best financial option would be the second as his PV is the lowest</u>

<u></u>

Explanation:

we will calcualte each option present value using the annuit formula

PTM \times \frac{1-(1+r)^{-time} }{rate} = PV\\

<u>second option</u>

PTM 82,000

time 10 years

rate 0.08

82000 \times \frac{1-(1+0.08)^{-10} }{0.08} = PV\\

PV $550,226.6747  + 400,000 = 950,226

<u>third option (annuity-due)</u>

PTM 140,000

time 10years

rate         0.08

140000 \times \frac{1-(1+0.08)^{-10} }{0.08} (1+0.08)= PV\\

PV $1,014,564.3075

<u> fourth option (lump sum present value)</u>

\frac{Nominal}{(1 + rate)^{time} } = PV  

Nominal: 1,610,000.00

time      5 years

rate  0.08

\frac{1610000}{(1 + 0.08)^{5} } = PV  

PV   1,095,738.95

<u></u>

<u></u>

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tankabanditka [31]

Answer:

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Every activity has a cost driver, as for example for the expense or activity of rent is based on area allocated to each department thus cost driver here is area of the department.

Therefore, Activity based Costing encourages the process value analysis, which process is best.

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4 0
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If businesses are producing at capacity, and the nation is experiencing almost full employment (a very low rate of unemployment
Ivanshal [37]

Answer:

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If a family spends its entire budget in a given time frame, the family can afford either 15 movie nights or 8 restaurant meals.
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The correct answer is 0.533 restaurant meals.

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= \frac{8}{15}

= 0.533 restaurant meals

3 0
3 years ago
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