Ch 5 in-class problems DAY 1

A.

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 $1,000,000 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 $135,000 with the first payment due immediately.
4. Make one lump-sum payment of $1,500,000 five years from date of purchase.
5. Make annual payments of $144,000 for 10 years starting 5 years from now.
 
Required:
Determine the best alternative for Harding, assuming that Harding can borrow funds at an 8% interest rate.