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:Determine the best alternative for Harding, assuming that Harding can borrow funds at an 8% interest rate.
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
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:
Determine the best alternative for Harding, assuming that Harding can borrow funds at an 8% interest rate.
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