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A construction firm wants to buy a building site and has the following options of payment schedules-
a) pay 67,000 in cash
b) pay 12,000 per year for 8 years where the first installment is to be paid at once.
c) pay 22,000 in cash and thereafter 7,000 per year for 12 years, where the first payment is to be paid immediately after 1 year.
Determine which schedule is least expensive if the interest rate is 11.5% and the firm has atleast 67,000 available in cash. What happens if the firm can afford only 22,000 as an immediate payment? or if the interest rate is 12.5%?
Please tell me what each answer you get means. Like an explanation of the answer.
Thank you! :)
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