Question
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
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 discount of 10% from the purchase price. Assume the product sells for $100. a-1. Calculate the present value of the payments if you can borrow or lend funds at an interest rate of 7 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.) a-2 Which is a better deal? b-1. Calculate the present value if the payments on the 4-year installment plan do not start for a full year. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b-2. Which is a better deal?
| a-1. | PV of installment plan | |
| a-2. | Which is a better deal? | |
| b-1. | PV of installment plan | |
| b-2. | Which is a better deal? |
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Financial Management Of Financial Institutions
Authors: George H Hempel
1st Edition
0133159604, 9780133159608
