Question
A store offers two payment plans. Under the installment plan, you pay 12.5% down and 12.5% of the purchase price in each of the next
A store offers two payment plans. Under the installment plan, you pay 12.5% down and 12.5% of the purchase price in each of the next 7 years. If you pay the entire bill immediately, you can take a 15% discount from the purchase price.
a. Calculate the present value of the payments, if you can borrow or lend funds at a 6% interest rate. Assume the product sells for $100. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $
b. Calculate the payment net of discount. Payment net of discount $ c.
c. Which is a better deal?
Installment payment plan
Pay the entire bill immediately
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started