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Your firm is considering the purchase of a new office phone system. You can either pay $31,500 now, or $900 per month for 34 months.

Your firm is considering the purchase of a new office phone system. You can either pay $31,500 now, or $900 per month for 34 months.

a. Suppose your firm currently borrows at a rate of 6% per year (APR with monthly compounding). What is the present value of the monthly cash flows and which payment plan is more attractive?

b. Suppose your firm currently borrows at a rate of 20% per year (APR with monthly compounding). What is the present value of the monthly cash flows and which payment plan is more attractive?

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