Foot Loose, Inc., needs to purchase a new shoelace-making machine. Machines Ready has agreed to sell Foot Loose the machine for $22,000 down and four payments of $5,700 to be paid in semiannual installments for the next two years. Do-It-Yourself Machines has offered to sell Foot Loose a comparable machine for $10,000 down and four semiannual payments of $9,000. If the current interest rate is 16%, compounded semiannually, which machine should Foot Loose purchase?
Investment decisions are generally long-term decisions which are made after making a comprehensive evaluation of all the available alternatives. The alternative that either offers least cost or highest benefits or both is finally chosen.
Answer and Explanation: 1
Foot Loose should purchase the machine from Do-It-Yourself Machines as the cost of machine if purchased from it, $39,809.14, is lower than the cost of...
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fromChapter 8 / Lesson 3
Learn how to find present value of annuity using the formula and see its derivation. Study its examples and see a difference between Ordinary Annuity and Annuity Due.