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Harness corp has contracted with tharp contractors to build

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Harness Corp. has contracted with Tharp Contractors to build a new building. The building is scheduled for completion in two years. Tharp has given Harness one of three payment options:

Option 1 - Pay $2,000,000 immediately

Option 2 - Pay $1,100,000 at the end of each year for the next two years

Option 3 - Pay $2,500,000 at the end of the two year period

Assume that both Harness and Tharp use a 10% discount rate in making investment decisions.

1. Which investment option should Harness choose?

2. What payment option would Tharp like for Harness to choose?

Reference no: EM13574940

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