Sally wants to buy a Ford Mustang. The MSRP is $26,176. Ford offers a purchase financing plan with no money down and 84 end-of-month payments of $390.
Should she buy the car for cash or take Ford's purchase financing?
Assume that she has the cash and she can invest her money and earn at least 4%.
What is the present value of all the payments?
In order to determine how to pay for a car (or other large purchase) one should calculate the present value of all cash flows discounted at a rate of return which can be earned.
Answer and Explanation: 1
We can figure out whether to buy it for cash or finance it by solving for the future value of investing the amount, and pay off the car each month. ...
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fromChapter 6 / Lesson 6
Consumer credit appears in three different types based on creditworthiness, the ability to repay, varying between method of repayment, and interest rates. Examine the details and differences of installment, non-installment, and revolving credit.