E9-17 Computing a Present Value Involving an Annuity and a Single Payment LO9-7

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

Pay $640 per month for 30 months and an additional $10,000 at the end of 30 months. The dealer is charging an annual interest rate of 24%.

Make a one-time payment of $19,855, due when you purchase the car.

E9-17 Computing a Present Value Involving an Annuity and a Single Payment LO9-7 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) (Use the appropriate factor(s) from the tables provided.) a. Pay $640 per month for 30 months and an additional $10,000 at the end of 30 months. The dealer is charging an annual interest rate of 24%. b. Make a one-time payment of $19,855, due when you purchase the car. 1-a. Determine how much cash the dealer would charge in option (a). (Round your final answer to nearest whole dollar.) Present value 4,121 1-b. In present value terms, which offer is clearly a better deal? Optiona Option b The present values of the options are nearly the same