Question

Star Studios is looking to purchase a new building for its upcoming film productions. The company finds a suitable location that has a list price of $1,600,000.
The seller gives Star Studios the following purchase options:
1. Pay $1,600,000 immediately.
2. Pay $600,000 immediately and then pay $150,000 each year over the next 10 years, with the first payment due in one year.
3. Make 10 annual installments of $250,000, with the first payment due in one year.
4. Make a single payment of $2,300,000 at the end of five years.

Required:
Determine the lowest-cost alternative for Star Studios, assuming that the company can borrow funds to finance the purchase at 8%.



$1.99
Sales2
Views92
Comments0
  • CreatedJuly 15, 2014
  • Files Included
Post your question
5000