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On January 1, 2019, Peppermint Patty Baseball Inc. intends to purchase a new pitching machine.
On January 1, 2019, Peppermint Patty Baseball Inc. intends to purchase a new pitching machine. Two baseball equipment dealers have offered Peppermint the following payment plans for identical tractors:
Plan 1 - CB Baseball Equipment's plan calls for five annual payments $10,350 with the first payment on 1/1/2019, and remaining payments at the beginning of the next four years.
Plan 2 - Homerun Equipment requires semiannual payments of $5,750 at the end of each of the next 10 semiannual periods, with the first payment occurring on 6/30/2019.
Assume the applicable interest rate for both plans is 8%.
Required: Determine the present value of each plan and which plan Peppermint Patty should accept.
