You are considering buying a new top of the line luxury car. The cars list price is $99,000. The dealer has offered you two alternatives for purchasing the car:

• You can buy the car for $90,000 and get a $9,000 discount in the bargain.
• You can buy the car for the list price of $99,000. In this case, the dealer is willing to take $39,000 as an initial payment. The remainder of $60,000 is a zero interest loan to be paid back in equal installments over 36 months.

Alternatively, your local bank is willing to give you a car loan at an annual interest rate of 10% compounded monthly (that is 10%/12 per month).

Decide how to finance the car: Bank loan or zero interest loan with the dealer, or cash payment.

Please show Excel formulas.

P

A F G H 1 w N 2 Cost of car 3 Cash discount 4 Cash cost after discount 5 credit cost 6 Bank loan, monthly 7 EAIR, bank 8 IRR, monthly 9 of cash minus zero % 10 EAIR, dealer 11 B D E BUYING A LUXURY CAR 99,000 Option 2 9,000 Rate 90,000 #NAME? Cash 0 Financed #NAME? Periods #NAME? Monthly Payment Present Value 0% 39000 60000 36 ($1,666.67) $99,000.00 99000 10% 120 ($9,900.11) 99000 #NAME? #NAME? Zero % loan Cash 12 13 PV of alternative 14 Zero% loan Cash minus "zero%" loan Cash 15 Period 16 17 0 #NAME? 1 18 2 19 3 20 4 5 21 22 23 6 7 24 8 25 9 26 10 11 27 28 12 13 29 30 14 31 15