Intermediate Accounting: P6-3 Harding Company is in the process of purchasing
Intermediate Accounting P6-3 Analysis of alternatives 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 $1,500,000 five years from date of purchase.
Required: a. Determine the present value, assuming that Harding can borrow funds at an 4.5% interest rate. (UseTable 2, Table4, and Table 6)(Round "PV Factor" to 5 decimal places and final answers to the nearest dollar amount.Omit the "$" sign in your response.) b. Determine the best alternative for Harding, assuming that Harding can borrow funds at an 8% interest rate.