Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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 plus 10% 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 $120,000 and therefore has the following payment options:
Option 1
Option 2
Option 3
Payment Payment in One
Today
Year
Req 1A
$ 120,000
60,000
0
Required:
1-a. Assuming an annual discount rate of 11%, calculate the present value and the total cost.
1-b. Which option's cost has the lowest present value?
Option 1
Option 2
Option 3
Complete this question by entering your answers in the tabs below.
$0
66,000
138,000
Req 1B
Total
Payment
$ 120,000
126,000
138,000
Assuming an annual discount rate of 11%, calculate the present value and the total cost.
Note: Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places. (FV of $1, PV of $1, FVA of $1,
and PVA of $1)
Payment
Today
Present Value of
Payment in One Year
Total Present Value
(or Total Cost)
< Reg 1A
Req 1B >
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Transcribed Image Text:ces 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 plus 10% 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 $120,000 and therefore has the following payment options: Option 1 Option 2 Option 3 Payment Payment in One Today Year Req 1A $ 120,000 60,000 0 Required: 1-a. Assuming an annual discount rate of 11%, calculate the present value and the total cost. 1-b. Which option's cost has the lowest present value? Option 1 Option 2 Option 3 Complete this question by entering your answers in the tabs below. $0 66,000 138,000 Req 1B Total Payment $ 120,000 126,000 138,000 Assuming an annual discount rate of 11%, calculate the present value and the total cost. Note: Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Payment Today Present Value of Payment in One Year Total Present Value (or Total Cost) < Reg 1A Req 1B >
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