Requirement 1. Using the net present value method, calculate the comparative cos

Question

Requirement 1. Using the net present value method, calculate the comparative cost of each of the three payment plans being considered by New Olgy.

(Round your final answers to the nearest whole dollar.)

The net present value cost of Plan I is $ _

.

More Info . Plan I: Payment of $225,000 at the time of signing the contract and $4,575,000 upon . Plan II: Payment of $1,550,000 at the time of signing the contract and $1,550,000 at the end . Plan IlIl: Payment of $300,000 at the time of signing the contract and $1,475,000 at the end completion of the building. The end of the second year is the completion date. of each of the 2 succeeding years. of each of the 3 succeeding years.

Explanation / Answer

Plan 1:

NPV of Plan 1 = 4,296,733.71

Plan II:

NPV of Plan II = 4,391,758.63

Plan III:

NPV of Plan III = 4,242,692.63

6.00% Cash flows Year Discounted CF                    225,000.00 0 225000.00                                      -   1 0.00                4,575,000.00 2 4071733.71

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