Ralston Consulting, Inc., has a $16,000 overdue debt with Supplier No. 1. The company is low on cash, with only $4,480 in the checking account and does not want to borrow any more cash. Supplier No. 1 agrees to settle the account in one of two ways: Option 1: Pay $4,480 now and $15,200 when some large projects are finished, two years from today. Option 2: Pay $22,400 three years from today, when even larger projects are finished. Assuming that the only factor in the decision is the cost of money (15%). https://openstax.org/books/principles-managerial-accounting/pages/time-value-of-money A. Calculate the present value of each option. Round your present value factor to three decimal places and final answer to the nearest dollar. Present value of Option 1 $_____ Present value of Option 2 $_____ B. Which option should Ralston choose?
Ralston Consulting, Inc., has a $16,000 overdue debt with Supplier No. 1. The company is low on cash, with only $4,480 in the checking account and does not want to borrow any more cash. Supplier No. 1 agrees to settle the account in one of two ways:
Option 1: Pay $4,480 now and $15,200 when some large projects are finished, two years from today.
Option 2: Pay $22,400 three years from today, when even larger projects are finished. Assuming that the only factor in the decision is the cost of money (15%).
https://openstax.org/books/principles-managerial-accounting/pages/time-value-of-money
A. Calculate the present value of each option. Round your present value factor to three decimal places and final answer to the nearest dollar.
Present value of Option 1 $_____
Present value of Option 2 $_____
B. Which option should Ralston choose?
______
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