Answered: Required: 1-a. Assuming an annual…

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?

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Please DO NOT GIVE SOLUTION IN IMAGE FORMAT THANKU

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 $55,000 and therefore
has the following payment options:
Option 1
Option 2
Option 3
Req 1A
Payment
Today
$55,000
27,500
0
Option 1
Option 2
Option 3
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?
Complete this question by entering your answers in the tabs below.
Req 1B
$
Payment
Today
Payment in
One Year
$0
30,250
63,250
Assuming an annual discount rate of 11%, calculate the present value and the total cost. (FV c
and PVA of $1) (Use tables, Excel, or a financial calculator. Round your answers to 2 decimal
55,000
27,500
0
$
Total
Payment
$55,000
Present Value of
Payment in One Year
57,750
63,250
0
Total Present Value
(or Total Cost)

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