On August 1, 2016, Jason purchased machinery from Morgan for expanding its production operation. Morgan has given Jason three options for payment:
a. $300,000 in cash now
b. $150,000 down payment now and $50,000 per year for the next ten years beginning August 1, 2017
c. $100,000 now and $100,000 per year for five years beginning August 1, 2017
Required:
Determine which of the above payment plans has the lowest present value. Clearly label all of your work. The effective annual interest rate is expected to be 12% during this period.

Question

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The Answer of On August 1, 2016, Jason purchased machinery from Morgan for expanding its production operation. Morgan has given Jason three options for payment:
a. $300,000 in cash now
b. $150,000 down payment now and $50,000 per year for the next ten years beginning August 1, 2017
c. $100,000 now and $100,000 per year for five years beginning August 1, 2017
Required:
Determine which of the above payment plans has the lowest present value. Clearly label all of your work. The effective annual interest rate is expected to be 12% during this period.

On August 1, 2016, Jason Purchased Machinery from Morgan for Expanding