E9-17 (Algo) Computing a Present Value Involving an Annuity and a Single Payment LO 9-7

You have decided to buy a used car. The dealer has offered you two options: (FV of $1, PV of $1, FVA of $1, and PVA of $1)

Note: Use the appropriate factor(s) from the tables provided.

1. Pay $540 per month for 25 months and an additional $12,000 at the end of 25 months. The dealer is charging an annual interest rate of 24 percent.
2. Make a one-time payment of $16,507, due when you purchase the car.

Required:

1-a. Determine how much cash the dealer would charge in option (a).

Note: Round your intermediate calculations and final answer to 2 decimal places.

1-b. In present value terms, which offer is a better deal?