You want to buy a brand new Tesla Model S car. The dealer offers
you 3 payment options:
(1) Make monthly payments of $2,325 over a period of 3 years at the
end of every month.
(2) Pay $10,000 upfront, and $65,000 3 years from now.
(3) Make 3 equal payments at the end of every year so that the
present value is equal to $85,253.
Annual interest rate is 12%.
Required:
Calculate the present value of option (1).
Calculate the present value of option (2).
Calculate the amount of the equal payment in option (3).
Which option is preferable? Explain.
The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.
Get Answers For Free
Most questions answered within 1 hours.