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Item 30 Harding Company is in the process of purchasing several large pieces of equipment from Danning Machine Corporation.

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Item 30

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 $1,120,000 in cash immediately.

2.Pay $400,000 immediately and the remainder in 12 annual installments of $86,000, with the first installment due in one year.

3. Make 12 annual installments of $130,000 with the first payment due immediately.

4. Make one lump-sum payment of $1,700,000 six years from date of purchase.

Required:

Determine the best alternative for Harding, assuming that Harding can borrow funds at a 7% interest rate. (Round your final answers to nearest whole dollar amount.)

option 1

option2

option 3

option4

best alternative for harding

 
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