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Determine which of the preceding plans offers William

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Problem - Purchase of Asset - William Thomas intends to purchase a tractor on credit. Two local implement dealers have offered him the following payment plans for identical tractors:

1. Redd Truck \& Tractor's plan calls for 5 annual payments of $10,350 with the first payment now and the remaining payments at the beginning of each of the next 4 years.

2. Greene Farm Implements requires semiannual payments of $5,750 at the end of each of the next 10 semiannual periods, with the first payment to be in 6 months.

Required - Determine which of the preceding plans offers William the lower present value. The applicable annual interest rate is 10% for both alternatives.

Reference no: EM132882957

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