Your firm is considering the purchase of a new office phone system. You can either pay (Option 1) $32,000 now, or (Option 2)$1,000 per month for 36 months.

1. Suppose your firm currently borrows at 6% per year compounding monthly. Which option is best?

2. Suppose your firm currently borrows at 10% per year compounding monthly. Which payment plan option is more attractive in this case? Interest rate aside, what factors may force your firm into option 2.