PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 2, Problem 30PS
- a. Which is the better deal if the interest rate is 5%?
- b. How will your answer change if the four payments on the installments do not start until the end of the year?
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A store offers two payment plans. Under the installment plan, you pay 20% down and 20% of the purchase price in each of the next 3
years. If you pay the entire bill immediately, you can take a 10% discount from the purchase price.
a. Which is the better deal if the interest rate is 6.0%?
Installment Plan
O Immediate Plan
b. How will your answer change if the four payments on the instalments do not start until the end of the year?
O Installment Plan
O Immediate Plan
A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of the purchase price in each of the next 3
years. If you pay the entire bill immediately, you can get a discount of 11% on the purchase price. Assume the product sells for $100.
a-1. Calculate the present value of the payments if you can borrow or lend funds at an interest rate of 6 percent.
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
a-2 Which is a better deal?
b-1. Calculate the present value if the payments on the 4-year installment plan do not start for a full year.
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
b-2. Which is a better deal?
a-1. PV of installment plan
a-2. Which is a better deal?
b-1. PV of installment plan
b-2. Which is a better deal?
A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of the purchase price in each of the next 3 years. If you pay the entire bill immediately, you can take a 10% discount from the purchase price. Assume the product sells for $100.
a-1. Calculate the present value of the payments if you can borrow or lend funds at an interest rate of 5 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
a-2 Which is a better deal?
b-1. Calculate the present value if the payments on the 4-year installment plan do not start for a full year. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b-2. Which is a better deal?
Chapter 2 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 2 - (FV) In 1880, five aboriginal trackers were each...Ch. 2 - Prob. 2SQCh. 2 - (PV) Your company can lease a truck for 10,000 a...Ch. 2 - (RATE) Ford Motor stock was one of the victims of...Ch. 2 - Prob. 5SQCh. 2 - Prob. 6SQCh. 2 - Prob. 7SQCh. 2 - (NOMINAL) What monthly compounded interest rate...Ch. 2 - Opportunity cost of capital Which of the following...Ch. 2 - Opportunity cost of capital Explain why we refer...
Ch. 2 - Prob. 3PSCh. 2 - Compound interest New Savings Bank pays 4%...Ch. 2 - Compound interest In 2017, Leonardo da Vincis...Ch. 2 - Future values If you invest 100 at an interest...Ch. 2 - Prob. 7PSCh. 2 - Future values In the five years preceding the end...Ch. 2 - Discount factors a. If the present value of 139 is...Ch. 2 - Prob. 10PSCh. 2 - Prob. 11PSCh. 2 - Present values What is the PV of 100 received in:...Ch. 2 - Prob. 13PSCh. 2 - Present values A factory costs 800,000. You reckon...Ch. 2 - Present values Recalculate the NPV of the office...Ch. 2 - Present values and opportunity cost of capital...Ch. 2 - Perpetuities An investment costs 1,548 and pays...Ch. 2 - Perpetuities You have just read an advertisement...Ch. 2 - Growing perpetuities A common stock will pay a...Ch. 2 - Prob. 20PSCh. 2 - Prob. 21PSCh. 2 - Annuities Kangaroo Autos is offering free credit...Ch. 2 - Annuities David and Helen Zhang are saving to buy...Ch. 2 - Prob. 24PSCh. 2 - Annuities Several years ago, The Wall Street...Ch. 2 - Prob. 26PSCh. 2 - Prob. 27PSCh. 2 - Prob. 28PSCh. 2 - Prob. 29PSCh. 2 - Annuities due A store offers two payment plans....Ch. 2 - Amortizing loans A bank loan requires you to pay...Ch. 2 - Amortizing loans Suppose that you take out a...Ch. 2 - Future values and annuities a. The cost of a new...Ch. 2 - Prob. 34PSCh. 2 - Growing annuities You are contemplating membership...Ch. 2 - Prob. 36PSCh. 2 - Growing perpetuities and annuities Your firms...Ch. 2 - Compounding intervals A leasing contract calls for...Ch. 2 - Compounding intervals Which would you prefer? a....Ch. 2 - Compounding intervals You are quoted an interest...Ch. 2 - Prob. 41PSCh. 2 - Continuous compounding How much will you have at...Ch. 2 - Continuous compounding The continuously compounded...Ch. 2 - Prob. 44PSCh. 2 - Annuities Use Excel to construct your own set of...Ch. 2 - Declining perpetuities and annuities You own an...
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