Alice White has arranged to buy some home recording equipment. She estimates that it will have a 5-year useful life and no salvage value. The dealer, who is a friend, has offered Alice two alternative ways to pay for the equipment:
(a) Pay $2000 immediately and $500 at the end 0: one year.
(b) Pay nothing until the end of 4 years, when a single payment of $3000 must be made. Alice believes 12% is a suitable interest rate Use an annual cash flow analysis to determine which method of payment she should select.