A company purchased a fleet of trucks for $15.6 million. Payment was made by an immediate cash payment of $1 million and a payment plan of 12 month-end payments of $1.2972 million each to dealer A. Another dealer (dealer B) offered to finance the same purchase with an initial payment of $1 million and 12 monthly payments for the unpaid balance at an interest rate of 1% per month. Which offer should the company have accepted? Question 11 options: both offers are equivalent dealer A dealer B not sufficient information to make an informed decision

A company purchased a fleet of trucks for $15.6 million. Payment was made by an immediate cash payment of $1 million and a payment plan of 12 month-end payments of $1.2972 million each to dealer A. Another dealer (dealer B) offered to finance the same purchase with an initial payment of $1 million and 12 monthly payments for the unpaid balance at an interest rate of 1% per month. Which offer should the company have accepted? Question 11 options: both offers are equivalent dealer A dealer B not sufficient information to make an informed decision

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Deutsche Transport can lease a truck for four years at a cost of €38,000 annually. It can instead buy a truck at a cost of €88,000, with annual maintenance expenses of €18,000. The truck will be sold at the end of four years for €24,500. Ignore taxes. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Enter your answer in euros. Round your answer to the nearest whole number. b. Which is the better option: leasing or buying? a. Equivalent annual cost b. Better option
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A build to operate (BTO) company signed a contract to operate several industrial wastewater treatments plants for 10 years. The contract will pay the company $2.5 million now and amounts increasing by $200,000 each year through year 10. At an interest rate of 10% per year, what is the present worth of the contract now? Solve using (a) tabulated factors, and (b) a spreadsheet.
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A firm sells the same material with two separate payment plans.1. According to the 1st payment plan, the payment period is 12 months, each monthly payment is 10 837 000 dollars, and an interim payment of 12 million dollars is required at the end of the 6th month.2. In the 2nd payment plan, the payment period is 18 months, each monthly payment is 7 965 000 dollars and an interim payment of 36 million dollars is required at the end of the 12th month. Annual nominal interest rate for both options is 60%. Which payment plan would you recommend? In payments, discrete compound interest is applied.
Dave Krug finances a new automobile by paying $7,300 cash and agreeing to make 30 monthly payments of $460 each, the first payment to be made one month after the purchase. The loan bears interest at an annual rate of 12%. What is the cost of the automobile? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Monthly Payment Table Values are Based on: Present Value of Loan n i X = = + Table Factor Cash Down Payment = Present Value of Loan Cost of the Automobile
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