Coporate Finance

1. What is the cash flow today in case of the first option or 4000 down payment and zero interest rate for the remaining balance?

2. What is the cash flow for the following 48 months in case of the first option or 4000 down payment and zero interest rate for the remaining balance?

3. What is the cash flow for the current month in case of the second option or zero down payment and 8% annual interest rate for the remaining balance?

4. What is the cash flow for the following 48 months in case of the second option or zero down payment and 8% annual interest rate for the remaining balance?

Adam Rust looked at his mechanic and sighed. The mechanic had just pronounced a death sentence on his road-weary car. The car had served him well -at a cost of $500 it had lasted through four years of college with minimal repairs. Now, he desperately needs wheels. He has just graduated, and has a good job at a decent starting salary. He hopes to purchase his first new car. The car dealer seems very optimistic about his ability to afford the car payments, another first for him. The car Adam is considering is $35,000. The dealer has given him three payment options: 1. Zero percent financing, Make a $4000 down payment from his savings and finance the remainder with a 0% APR loan for 48 months. Adam has more than enough cash for the down payment, thanks to generous graduation gifts. 2. Rebate with no money down. Receive a $4000 rebate, which he would use for the down payment and leave his savings intact), and finance the rest with a standard 48-month loan, with an 8% APR. He likes this option, as he could think of many other uses for the $4000. 3. Pay cash. Get the $4000 rebate and pay the rest with cash. While Adam doesn't have $35,000, he wants to evaluate this option. His parents always paid cash when they bought a family car, Adam wonders if this really was a good idea. 1. What is the cash flow today in case of the first option or 4000 down payment and zero interest rate for the remaining balance? 2. What is the cash flow for the following 48 months in case of the first option or 4000 down payment and zero interest rate for the remaining balance? 3. What is the cash flow for the current month in case of the second option or zero down payment and 8% annual interest rate for the remaining balance? 4. What is the cash flow for the following 48 months in case of the second option or zero down payment and 8% annual interest rate for the remaining balance