A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of

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A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of the purchase price in each of the next 3 years. If you pay the entire bill immediately, you can take a 10% discount from the purchase price.

a. Which is a better deal if you can borrow or lend funds at a 5% interest rate?

b. How will your answer change if the payments on the 4-year installment plan do not start for a full year?

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Fundamentals of Corporate Finance

ISBN: 978-0077861629

8th edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus

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Question Posted: Jun 30, 2016 09:10 AM

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A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of

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a Compare the present value of the payments Assume the product sells ...View the full answer

Fundamentals of Corporate Finance

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