Question
You are looking at the car that is currently selling at $65,000. Classic Autos is offering free credit (i.e. no interest charged on the borrowed
You are looking at the car that is currently selling at $65,000. Classic Autos is offering free credit (i.e. no interest charged on the borrowed amount) on the car. You pay $10,000 down today and then pay the remaining balance at the end of 6years. Premium Motors next door does not offer credit, but will give you $20,000 off the list price if you pay cash now. Assume annual compounding with 9% discount rate. Which of the following statement is TRUE?
| A. | Premium autos is offering a better deal since its PV of cost is approximately 500 lower than that of Premium Motors. | |
| B. | Classic autos is offering a better deal since its PV of cost is approximately 2,200 lower than that of Premium Motors. | |
| C. | Classic autos is offering a better deal since its PV of cost is approximately 600 lower than that of Premium Motors. | |
| D. | Premium autos is offering a better deal since its PV of cost is approximately 2,400 lower than that of Premium Motors. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Inside Company Valuation
Authors: Angelo Corelli
1st Edition
3319537822, 9783319537825
