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Your firm is considering the purchase of a new office phone system. You can either pay $32,000 now, or $900 per month for 26 months.
Your firm is considering the purchase of a new office phone system. You can either pay
$32,000
now, or
$900
per month for
26
months.
a. Suppose your firm currently borrows at a rate of
7%
per year (APR with monthly compounding). Which payment plan is more attractive?
b. Suppose your firm currently borrows at a rate of
20%
per year (APR with monthly compounding). Which payment plan would be more attractive in this case?
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