Lights, Camera, and More sells filmmaking equipment. The company offers three pu

Question

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 trn L ghts, Camera and More for S135000 and therefore has the following payment options Payment in Today One YearTotal Payment Option 1 Option 2 Option 3 $135,000 67,500 74,250 155,250 $135,000 141,750 155,250 Required: 1-a Assuming an annual discount rate of 11%, calculate the present value and the total cost provided. Round your answers to 2 decimal places.) o 1 P o 1 R 0 1 and P o 1) (use appropriate factors) from the tables Present Value of Total Present Payment in One Value (or Total Cost) $ 135,000.00 Year Option 1 Option 2 Option 3

Explanation / Answer

Present value annuity factor at 11% for year 1 = 0.901

Present value of payment in one year Total Present value (or total cost) Option 1 0 135,000.00 Option 2 66,899.25 (74,250 * 0.901) 134,399.25 (66,899.25 + 67,500) Option 3 139,880.25 (155,250 * 0.901) 139,880.25

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