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Determine the present value of each alternative

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Question - York Ltd has purchased goods on account from Hampton Ltd. Hampton Ltd offers the following payment options:

An upfront payment of $40,000 today.

A lump sum payment of $48,000 due in two years' time.

A payment plan of $1,800 per month paid at the end of each month for two years.

A payment plan of $210 per month paid at the end of the month forever.

Assume the interest rate is 6% per annum and that interest is compounded monthly for all alternatives.

Required - Determine the present value of each alternative and determine which payment option York Ltd should select.

Reference no: EM133168389

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