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What is the present value of that option

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Question - Nelson Company owes money to Nash Company for the purchase of equipment. Nash Company has given Nelson the following payment options:

I. Immediate payment in full of $40,000.

II. Annual payments of $15,000 made at the end of each of the next three years.

III. A single payment of $50,000 made at the end of three years.Assume that both Nelson and Nash use a 16% interest rate compounded annually.

What option would Nash prefer, and what is the present value of that option?

Reference no: EM133034572

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