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Oceanaire Amusement Park is negotiating with an engineering firm in the planning, design, and construction of a new roller coaster. The ride will be completed and ready for service five years from now. Oceanaire has been given three alternative ways to pay for the roller coaster. Alternative 1, pay $1,325,000 upon completion. Alternative 2, pay $950,000 immediately. Alternative 3, pay $230,000 at the end of each year for the next five years. In evaluating the three alternatives, the management of Oceanaire has decided to assume an interest rate of 8%. Based upon this information, which alternative should Oceanaire's management choose to pay for the roller coaster?

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Accounting Basics, Accounting

Category:- Accounting Basics
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