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?