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Your firm is considering the purchase of a new office phone system. You can either pay $31,500 now, or $1050 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 $1050 per month for 34 months.

a. Suppose your firm currently borrows at a rate of 5% per year (APR with monthly compounding).Which payment plan is more attractive?

b. Suppose your firm currently borrows at a rate of 18% per year (APR with monthly compounding).Which payment plan would be more attractive in this case?

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