An Obligation Can Be Settled by Making a Payment of $12

question 16

Essay

An obligation can be settled by making a payment of $12 000 now and a final payment of $32 000 in 4 years. Alternatively, the obligation can be settled by payments of $2700 at the end of every three months for five years. Interest is 10% compounded quarterly.
Compute the present value of each alternative and determine the preferred alternative according to the discounted cash flow criterion.

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Definitions:

High Differentiation

A situation in organizations where there is a large variance in the nature of roles, responsibilities, and levels of authority.

Organizational Units

Subdivisions within an organization, defined by their specific functions, responsibilities, and roles.

Functional Departmentation

Employees with closely related skills and responsibilities are assigned to the same department.

Product Departmentation

Departments are formed on the basis of a particular product, product line, or service.