Problem 5-3 (Algo) Analysis of alternatives [LO5-3, 5-8] Hard Hat Company is in the process...

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Accounting

Problem 5-3 (Algo) Analysis of alternatives [LO5-3, 5-8]

Hard Hat Company is in the process of purchasing several large pieces of equipment from Machine Corporation. Several financing alternatives have been offered by Machine:

Pay $1,010,000 in cash immediately.
Pay $431,000 immediately and the remainder in 10 annual installments of $91,000, with the first installment due in one year.
Make 10 annual installments of $153,000 with the first payment due immediately.
Make one lump-sum payment of $1,720,000 five years from date of purchase.

Required:

Determine the best alternative for Hard Hat, assuming that Hard Hat can borrow funds at a(n) 11% interest rate.

Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Option 1:

Option 2:

Option 3:

Option 4:

The best alternative for hard hat:

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