Mitsubishi, the large Japanese electronics company, advertised its $4,499 Diamond Series 65-inch-wide screen Projection TV with no payments and no interest for 12 months.15 What role does the time value of money play in this promotion? Assuming that Mitsubishi is able to borrow funds at 8 percent interest, what is the cost to Mitsubishi of every customer who takes advantage of this offer? If you were able to borrow to pay cash for this TV, which rate would be more relevant in determining how much you might offer for the TV—the rate at which you borrow money or the rate Mitsubishi borrows money?
Interpreting Financial Reports Comparison of Two Companies’ Ratios with Industry Ratios