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Calculate the present value and the total cost

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Calculate the present value of a single amount

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 $145,000 and therefore has the following payment options:

                              Payment Today    Payment in One Year        Total Payment

Option 1                   $145,000               $0                                $145,000

Option 2                     72,500                79,750                              152,250

Option 3                       0                       166,750                           166,750

Required:

Question 1-a. Assuming an annual discount rate of 12%, calculate the present value and the total cost. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.)

Question 1-b. Which option's cost has the lowest present value?

Reference no: EM132539858

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