intLights, Camera, and More sells filmmaking equipment. The company offers three purchase options: (1) pay full cash today, (2) pay one-half down and the remaining one-half plus 10% in one year, or (3) pay nothing down and the full amount plus 15% in one year. George isconsidering buying equipment from Lights, Camera, and More for $150,000 and therefore has the following payment options:Option 1Option 2Option 3PaymentToday$ 150,00075,0000Payment in.One Year$092.500172,500TotalPayment$ 150,000157,500172.500Required:1-a. Assuming an annual discount rate of 11%, calculate the present value and the total cost1-b. Which option's cost has the lowest present value?

The present value (PV) method is one of the most popular methods for evaluating investments or…

Answered: B Lights, Camera, and More sells…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8MC: Grummet Company is acquiring a new wood lathe with a cash purchase price of $80,000. The Wood Master...

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Lights, Camera, and More sells filmmaking equipment. The company offers three purchase options: (1) pay full cash today, (2) pay one-half down and the remaining one-half plus10% in one year, or (3) pay nothing down and the full amount plus 15% in one year. George is considering buying equipment from Lights, Camera, and More for $150,000 and therefore has the following payment options: Payment Today Payment in One Year Total Payment Option 1 $150,000 $ 0 $150,000 Option 2 75,000 82,500 157,500 Option 3 0 172,500 172,500 Required:Assuming an annual discount rate of 11%, calculate which option’s cost has the lowest present value.
Chad Tayler would like to purchase a printing business from its owners. Chad anticipates that the business will generate cash flows of $80,000 per year for the next 10 years. At the end of 10 years. Chad intends to sell the store for an estimated $500,000. Determine the maximum price Chad Taylor should pay for the business assuming the annual interest rate of 5%. Once Determine Chad Taylor has the following choices to purchase the printing business: 1 pay the maximum price determined in the previous questions in cash. 2. Obtain a 10-year mortgage for the maximum price in the question with an annual payment of 120,000 What the pros and cons for each option what is the interest rate of the mortgage which payment option would you choose?
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