Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options:

1. Pay $27,500 for the car today.

2. Pay $2,500 at the end of each quarter for three years.

Required:

1-a. Assuming Denzel uses a discount rate of 8% (or 2% quarterly), calculate the present value. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.)

Present value

option 1:

option 2:

1-b. Which option gives him the lower cost?

Option 2 Option 1