I need help with these questions. Can anyone help me? Thank you
Homework Answers
a)
i) The present value of option 1 = $ 24,000
ii) The present value of option 2 is calculated as follows
Present value of option 2 = $ 32,164.91
iii) The present value of option 3 is calculated as follows
Present value option 3 = $34,899.92
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b)
Option 1 does not have interest cost.
Interest cost of option 2 = $ 32,164.91 - $ 24,000
Interest cost of option 2 = $ 8,164.91
Interest cost of option 3 = $34,899.92 - $ 24,000
Interest cost of option 3 = $10,899.92
--------------------------------------------------------------------------------------------------
c)
Interest cost percentage option 2 = 34.02%
Interest cost percentage option 3 = 45.42%
-----------------------------------------------------------------------------------------
d)
Car dealership want to finance the vehicle even if someone can fully afford the price because they earn commission for arranging the finance between the customers and the bank.
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I need help with these questions. Can anyone help me? Thank
you
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