You want to buy a brand new Tesla Model S car. The dealer offers you 3 payment options: (1) Make monthly payments of $2,325 over a period of 3 years at the end of every month. (2) Pay $10,000 upfront, and $65,000 3 years from now. (3) Make 3 equal payments at the end of every year so that the present value is equal to $85,253.

Annual interest rate is 12%.

Required:

1. Calculate the present value of option (1).

2. Calculate the present value of option (2).

3. Calculate the amount of the equal payment in option (3).

4. Which option is preferable? Explain.