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Q1. A construction firm wants to buy a building site and has the choice between three different payment schedules: a) Pay $67,000 in cash b)
Q1. A construction firm wants to buy a building site and has the choice between three
different payment schedules:
a) Pay $67,000 in cash
b) Pay $12,000 per year for 8 years, where the first installment is to be paid at once
c) Pay $22,000 in cash and thereafter $7000 per year for 12 years, where the first
installment is to be paid after 1 year
Determine which schedule is least expensive if the interest rate is 11.5% and the firm has at
least $67,000 available to spend in cash. What happens if the firm can only afford $22,000
as an immediate payment?
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