Question

You work for a furniture store. You normally sell a living room set for $4,000 and finance the full purchase price for 24 monthly payments at 24% APR. You are planning to run a zero-interest financing sale during which you will finance the set over 24 months at 0% interest. How much do you need to charge for the bedroom set during the sale in order to earn your usual combined return on the sale and the financing?

Answer 1

First calculate monthly pay for $4000 financing:

Using financial calculator BA II Plus - Input details:	#
I/Y = Rate = 24/12 =	2.000000
FV = Future value =	$0
N = Total payment term =	24
PV = Present value of loan =	-$4,000
CPT > PMT = Monthly Payment =	$211.48

Bedroom set if it for $4000 then:

Bedroom set should be sold for = Monthly payment x 24 months = $211.48 x 24

Bedroom set should be sold for = $5,075.6 which will be divided in 24 payments of $211.48