New Tech Corporation is a rapidly growing biotech company that has a required rate of return of 10​%. It plans to build a new facility in Santa Clara County. The building will take 2 years to...

New Tech Corporation is a rapidly growing biotech company that has a required rate of return of

10​%. It plans to build a new facility in Santa Clara County. The building will take 2 years to complete. The building contractor offered New Tech a choice of three payment​ plans, as​ follows:

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•	Plan​ I: Payment of $225,000 at the time of signing the contract and $4,800,000 upon completion of the building. The end of the second year is the completion date.
•	Plan​ II: Payment of $1,800,000 at the time of signing the contract and $1,800,000 at the end of each of the 2 succeeding years.
•	Plan​ III: Payment of $250,000 at the time of signing the contract and $1,500,000 at the end of each of the 3 succeeding years.

1.	Using the net present value​ method, calculate the comparative cost of each of the three payment plans being considered by New Tech.
2.	Which payment plan should New Tech ​choose? Explain.
3.	Discuss the financial​ factors, other than the cost of the​ plan, and the nonfinancial factors that should be considered in selecting an appropriate payment plan.

Extracted text: Present Value of Annuity of S1.00 in Arrears* Periods 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 32% 0.758 40% Periods Period 1 0.980 0.062 0.043 0.020 0.909 0.893 0.877 0.862 0.847 0.833 0.820 0.806 0.794 0.781 0.769 0.714 Period 1 Period 2 1.942 1.886 1.833 1.783 1.736 1.690 1.647 1.605 1.566 1.528 1.492 1.457 1.424 1.392 1.361 1.331 1.224 Period 2 Period 3 2.884 2.775 2.673 2.577 2.487 2.402 2.322 2.248 2.174 2.108 2.042 1.981 1.923 1.868 1.816 1.766 1.589 Period 3 Period 4 3.808 3.630 3.465 3.312 3.170 3.037 2.014 2.708 2.600 2.589 2.494 2.404 2.320 2.241 2.166 2.096 1.849 Period 4 2.864 3.167 Period 5 4.713 4.452 4.212 3.993 3.701 3.605 3.433 3.274 3.127 2.991 2.745 2.635 2.532 2.436 2.345 2.035 Period 5 Period 6 5.601 5.242 4.017 4.623 4.355 4.111 3.889 3.685 3.498 3.326 3.605 3.020 2.885 2.759 2.643 2.534 2.168 Period 6 Period 7 6.472 6.002 5.582 5.208 4.868 4.564 4.288 4.039 3.812 3.416 3.242 3.083 2.937 2.802 2.677 2.263 2.331 Period 7 Period 8 7.325 6.733 6.210 5.747 5.335 4.968 4.639 4.344 4.078 3.837 3.619 3.421 3.241 3.076 2.925 2.786 Period 8 Period 9 8.162 7.435 6.802 6.247 5.759 5.328 4.948 4.607 4.303 4.031 3.786 3.566 3.366 3.184 3.019 2.868 2.379 Period 9 7.360 6.145 5.210 5.453 Period 10 8.983 8.111 6.710 5.650 4.833 4.494 4.192 3.923 3.682 3.465 3.269 3.092 2.930 2.414 Period 10 Period 11 9.787 8.760 7.887 7.139 6.495 5.038 5.029 4.656 4.327 4.035 3.776 3.543 3.335 3.147 2.978 2.438 Period 11 Period 12 10.575 9.385 8.384 7.536 6.814 6.194 5.660 5.197 4.793 4.439 4.127 3.851 3.608 3.387 3.190 3.013 2.456 Period 12 Period 13 11.348 9.086 8.853 7.904 7.103 6.424 5.842 5.342 4.910 4.533 4.203 3.912 3.656 3.427 3.223 3.040 2.469 Period 13 Period 14 12.106 10.563 9.295 8.244 7.367 6.628 6.002 5.468 5.008 4.611 4.265 3.962 3.695 3.459 3.249 3.061 2.478 Period 14 4.315 4.357 Period 15 12.849 11.118 9.712 8.559 7.606 6.811 6.142 5.575 5.092 4.675 4.001 3.726 3.483 3.268 3.283 3.076 2.484 Period 15 Period 16 13.578 11.652 10.106 8.851 7.824 6.974 6.265 5.668 5.162 4.730 4.033 3.751 3.503 3.088 2.489 Period 16 Period 17 14.292 12.166 10.477 9.122 8.022 7.120 6.373 5.749 5.222 4.775 4.391 4.050 3.771 3.518 3.295 3.097 2.492 Period 17 Period 18 14.992 12.659 10.828 9.372 8.201 7.250 6.467 5.818 5.273 4.812 4.419 4.080 3.786 3.529 3.304 3.104 2.494 Period 18 Period 19 15.678 13.134 11.158 9.604 8.365 7.366 6.550 5.877 5.318 4.843 4.442 4.007 3.799 3.539 3.311 3.109 2.496 Period 19 Period 20 16.351 5.920 3.808 2.497 Period 20 13.590 14.029 11.470 9.818 8.514 7.489 6.623 5.353 4.870 4.460 4.110 3.546 3.316 3.113 Period 21 17.011 11.764 10.017 8.649 7.502 6.687 5.973 5.384 4.891 4.476 4.121 3.816 3.551 3.320 3.118 2.498 Period 21 Period 22 17.658 14.451 12.042 10.201 8.772 7.645 6.743 6.011 5.410 4.900 4.488 4.130 3.822 3.556 3.323 3.118 2.498 Period 22 3.325 3.327 Period 23 18.292 14.857 12.303 10.371 8.883 7.718 6.702 6.044 5.432 4.925 4.499 4.137 3.827 3.559 3.120 2.499 Period 23 Period 24 18.914 15.247 12.550 10.529 8.985 7.784 6.835 6.073 5.451 4.937 4.507 4.143 3.831 3.562 3.121 2.499 Period 24 Period 25 19.523 15.622 12.783 10.675 9.077 7.843 6.873 6.097 5.467 4.948 4.514 4.147 3.834 3.564 3.329 3.122 2.499 Period 25 Period 26 20.121 15.983 13.003 10.810 9.181 7.896 6.908 6.118 5.480 4.956 4.520 4.151 3.837 3.566 3.330 3.123 2.500 Period 26 Period 27 20.707 18.330 13.211 10.935 9.237 7.943 6.935 6.136 5.492 4.964 4.524 4.154 3.839 3.567 3.331 3.123 2.500 Period 27 Period 28 21.281 18.663 13.406 11.051 9.307 7.984 6.001 6.152 5.502 4.970 4.528 4.157 3.840 3.568 3.331 3.124 2.500 Period 28 Period 29 21.844 18.984 13.591 5.510 11.158 13.765 11.258 9.370 8.022 6.983 6.166 4.975 4.531 4.159 3.841 3.569 3.332 3.124 2.500 Period 29 Period 30 22.396 17.292 9.427 8.055 7.003 6.177 5.517 4.970 4.534 4.160 3.842 3.569 3.332 3.124 2.500 Period 30 Period 35 24.999 18.665 14.498 11.655 9.644 8.176 7.070 6.215 5.539 4.992 4.541 4.184 3.845 3.571 3.333 3.125 2.500 Period 35 Period 40 27.355 19.793 15.046 11.925 9.779 8.244 7.105 6.233 5.548 4.997 4.544 4.168 3.846 3.571 3.333 3.125 2.500 Period 40 Payments (or receipts) at the end of each period.


Extracted text: Present Value of $1 Periods 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 32% 40% Periods Period 1 0.980 0.062 0.043 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.820 0.806 0.794 0.781 0.769 0.758 0.714 Period 1 0.502 0.455 Period 2 0.961 0.025 0.890 0.857 0.826 0.797 0.769 0.743 0.718 0.604 0.672 0.650 0.630 0.610 0.574 0.510 Period 2 Period 3 0.942 0.889 0.840 0.794 0.751 0.712 0.675 0.641 0.609 0.579 0.551 0.524 0.500 0.477 0.435 0.364 Period 3 Period 4 0.924 0.855 0.792 0.735 0.683 0.636 0.592 0.552 0.516 0.482 0.451 0.423 0.397 0.373 0.350 0.329 0.260 Period 4 Period 5 0.906 0.822 0.747 0.681 0.621 0.567 0.510 0.476 0.437 0.402 0.370 0.341 0.315 0.201 0.260 0.250 0.186 Period 5 0.705 0.665 0.627 0.335 0.270 Period 6 0.888 0.790 0.630 0.564 0.507 0.456 0.410 0.370 0.303 0.249 0.275 0.250 0.227 0.207 0.189 0.133 Period 6 Period 7 0.871 0.760 0.583 0.513 0.452 0.400 0.354 0.314 0.222 0.198 0.178 0.159 0.123 0.143 0.095 Period 7 Period 8 0.853 0.731 0.540 0.487 0.404 0.351 0.305 0.260 0.233 0.204 0.179 0.157 0.139 0.108 0.068 Period 8 Period 9 0.837 0.703 0.502 0.500 0.424 0.361 0.308 0.263 0.225 0.104 0.187 0.144 0.125 0.108 0.094 0.082 0.048 Period 9 Period 10 0.820 0.676 0.558 0.483 0.386 0.322 0.270 0.227 0.191 0.182 0.137 0.118 0.099 0.085 0.073 0.062 0.035 Period 10 Period 11 0.804 0.650 0.527 0.429 0.350 0.287 0.237 0.195 0.182 0.135 0.112 0.094 0.070 0.068 0.058 0.047 0.025 Period 11 0.625 0.076 0.036 0.033 0.027 Period 12 0.788 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 0.092 0.062 0.052 0.043 0.018 Period 12 Period 13 0.773 0.601 0.489 0.368 0.200 0.229 0.182 0.145 0.116 0.093 0.075 0.061 0.050 0.040 0.013 Period 13 Period 14 0.758 0.577 0.442 0.340 0.283 0.205 0.180 0.125 0.009 0.078 0.062 0.049 0.030 0.032 0.025 0.021 0.009 Period 14 Period 15 0.743 0.555 0.417 0.315 0.239 0.183 0.140 0.108 0.084 0.065 0.051 0.040 0.031 0.025 0.020 0.016 0.012 0.000 0.008 Period 15 Period 16 0.728 0.534 0.394 0.292 0.218 0.163 0.123 0.093 0.071 0.054 0.042 0.032 0.025 0.019 0.015 0.005 Period 16 Period 17 0.714 0.513 0.371 0.270 0.198 0.146 0.108 0.080 0.060 0.045 0.034 0.026 0.020 0.015 0.012 0.003 Period 17 Period 18 0.700 0.494 0.350 0.250 0.180 0.130 0.005 0.069 0.051 0.038 0.028 0.021 0.016 0.012 0.000 0.007 0.002 Period 18 Period 19 0.686 0.475 0.331 0.232 0.184 0.116 0.083 0.060 0.043 0.031 0.023 0.017 0.012 0.009 0.007 0.005 0.002 Period 19 Period 20 0.673 0.456 0.312 0.215 0.149 0.104 0.073 0.051 0.037 0.026 0.019 0.014 0.010 0.007 0.005 0.004 0.001 Period 20 Period 21 0.660 0.199 0.093 0.083 0.439 0.204 0.135 0.064 0.044 0.031 0.022 0.015 0.011 0.008 0.006 0.004 0.003 0.001 Period 21 Period 22 0.647 0.422 0.278 0.184 0.123 0.056 0.038 0.026 0.018 0.013 0.009 0.006 0.004 0.003 0.002 0.001 Period 22 Period 23 0.634 0.406 0.262 0.170 0.112 0.074 0.049 0.033 0.022 0.015 0.010 0.007 0.005 0.003 0.002 0.002 0.000 Period 23 Period 24 0.622 0.390 0.247 0.158 0.102 0.068 0.043 0.028 0.019 0.013 0.008 0.006 0.004 0.003 0.002 0.001 0.000 Period 24 Period 25 0.810 0.375 0.233 0.148 0.002 0.059 0.038 0.024 0.018 0.010 0.007 0.005 0.003 0.002 0.001 0.001 0.000 Period 25 Period 26 0.598 0.361 0.220 0.135 0.084 0.053 0.033 0.021 0.014 0.009 0.006 0.004 0.002 0.002 0.001 0.001 0.000 Period 26 Period 27 0.586 0.347 0.207 0.125 0.076 0.047 0.029 0.018 0.011 0.007 0.005 0.003 0.002 0.001 0.001 0.001 0.000 Period 27 Period 28 0.574 0.333 0.196 0.116 0.089 0.042 0.026 0.016 0.010 0.008 0.004 0.002 0.002 0.001 0.001 0.000 0.000 Period 28 Period 29 0.563 0.321 0.185 0.107 0.063 0.037 0.022 0.014 0.008 0.005 0.003 0.002 0.001 0.001 0.000 0.000 0.000 Period 29 Period 30 0.552 Period 35 0.500 0.308 0.174 0.099 0.057 0.033 0.020 0.012 0.007 0.004 0.003 0.002 0.001 0.001 0.000 0.000 0.000 Period 30 0.253 0.130 0.068 0.036 0.019 0.010 0.006 0.003 0.002 0.001 0.001 0.000 0.000 0.000 0.000 0.000 Period 35 Period 40 0.453 0.208 0.097 0.046 0.022 0.011 0.005 0.003 0.001 0.001 0.000 0.000 0.000 0.000 0.000 0.000 0.000 Period 40