- Lights Camera And More Sells Filmmaking Equipment The Company Offers Three Purchase Options 1 Pay Full Cash Today 1 (25.99 KiB) Viewed 13 times
2. The payments received at the beginning of each of the five years and interest is compounded annually.
3. The payments are received at the end of each of the five years and interest is compounded quarterly.
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 $150,000 and therefore has the following payment options: Option 1 Option 2 Option 3 Payment Today $ 150,000 75,000 0 Payment in One Year $0 82,500 172, 500 Total Payment $ 150,000 157, 500 172,500 Required: 1-a. Assuming an annual discount rate of 11%, calculate the present value and the total cost. 1-b. Which option's cost has the lowest present value?