As CFO of a small manufacturing firm, you have been asked to determine the best financing...

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As CFO of a small manufacturing firm, you have been asked to determine the best financing for the purchase of a new piece of

Present Value of 1 (n) periods 1 2 3 4 5 6 7 8 9 10 2% 21/2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% 0.98039 0.97561 0.97087 0.9

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Answer 1

Answer #1

Solution:

Present value - option 1 = $9,000 * Cumulative PV factor at 7% for 5 periods

= $9,000 * 4.10020 = $36,902

Present value - option 2 = $40,000 * PV factor at 7% for 2nd period

= $40,000 * 0.87344

= $34,938

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Answer 2

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