# Accounting

posted by
**Eyob** on
.

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 $950,000 in cash immediately.

2.

Pay $420,000 immediately and the remainder in 10 annual installments of $80,000, with the first installment due in one year.

3. Make 10 annual installments of $125,000 with the first payment due immediately.

4. Make one lump-sum payment of $1,580,000, 3 years from date of purchase.

Required:

Determine the best alternative for Harding, assuming that Harding can borrow funds at a(n) 4% interest rate.

Round all PV factors to 5 decimal places if you use the PV tables, and final answers to the nearest whole dollar.

Choose the best alternative by entering the option number in the answer box.

1 PV = $ ____________

2 PV = $420,000 +($ ____________ x ____________)= $ ____________

3 PV = $ ____________ x ____________ = $ ____________

4 PV = $ ____________ x ____________ = $ ____________

Harding should choose option ____________ .