An equipment vendor has submitted a proposal with both a cash price and an exten
ID: 2804395 • Letter: A
Question
An equipment vendor has submitted a proposal with both a cash price and an extended payment schedule on the purchase of a $400,000 (cash price) piece of equipment. Under the extended payment plan, the hospital can pay $200,000 down and S90,000 per year for the next three years. The organization has the full S400,000 cash available now and could use it for the purchase in lieu of adding the amount to its endowment, which has been earning a 10% annual return. Match the label on the financial timeline below with the appropriate value to illustrate the extended payment schedule. 0 a. Extended Payment Schedule e. E. Label a. D. Label b. Label c. -. Label d. CLabel e A-5% B. 10% C. ($90,000) D. E. ($400,000)Explanation / Answer
a - Purchase of $400,000. Hence, a -> E
b - Down payment of $200,000. Hence, b -> D
c, d, and e - Payment of 90,000. Hence, c, d and e -> C.