Question
Assume you are interested in purchasing a new truck valued at $40,000 for you new business. The dealer would finance at 5% with equal quarterly
Assume you are interested in purchasing a new truck valued at $40,000 for you new business. The dealer would finance at 5% with equal quarterly repayments stretched over a 6-year period. The dealer has accepted your 5-year old Subaru in lieu of $12,000, toward the financing (your down-payment, if you will). Answer the following question: Your financial position is such that the proceeds of your business could only meet a $2,000 per quarter repayment toward the acquisition of the vehicle. Would you continue with the acquisition of the asset? Explain using the TVM principle.
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