A certain manufacturing plant is being sold and was submitted for bidding. Two bids were submitted by interested buyers. The first bid offered to pay 200,000.00 each year for 5 years, each payment being made at the beginning of each year. The second bidder offered to pay 120,000.00 the first year, 180,000.00 the second year and 270,000.00 each year for the next 3 years, all payments being made at the beginning of each year. If money is worth 12 % compounded annually, which bid should the owner of plant accept? ANS. BID 2 MUST BE ACCEPTED; bid 1 = 807,469.87; bid 2 = 859,727.18 %3D

A certain manufacturing plant is being sold and was submitted for bidding. Two bids were submitted by interested buyers. The first bid offered to pay 200,000.00 each year for 5 years, each payment being made at the beginning of each year. The second bidder offered to pay 120,000.00 the first year, 180,000.00 the second year and 270,000.00 each year for the next 3 years, all payments being made at the beginning of each year. If money is worth 12 % compounded annually, which bid should the owner of plant accept? ANS. BID 2 MUST BE ACCEPTED; bid 1 = 807,469.87; bid 2 = 859,727.18 %3D

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 2P

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A certain manufacturing plant is being sold and was submitted for bidding. Two bids weresubmitted by interested buyers. The first bid offered to pay P200,00 each year for 5 years,each payment being made at the beginning of each year. The second bidder offered to payP120,000 the first year,P180,000 the second year and P270,000 each year for the next 3years, all payments being made at the beginning of each year. If money is worth 12%compounded annually, which bid should owner of the plant accept?
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