Suppose You Have $1,100 and Decide to Purchase a New

question 25

Essay

Suppose you have $1,100 and decide to purchase a new model of television that costs you $1,100. You find an electronics store where a gift voucher, worth $50, is offered for this TV model if payment is made in full at the time of purchase. Alternatively, it can be financed at zero-percent (0%) interest for 5 months with a monthly payment of $220. You now have two options: either opt for the zero-percent financing option for the full amount and invest your money at an annual interest rate of 10%; or choose the full-payment option with the $50 discount. Develop a spreadsheet model to find the better option that results in the most savings. Also, find the discount rate for the zero-percent financing option.
Hint: Use Goal Seek to find the discount rate that makes the net present value of the payments = $1,050.
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Definitions:

Renewable Resources

Natural resources that can be replenished naturally over time, such as sunlight, wind, and biomass.

True Cost

The real cost of production, considering all direct and indirect expenses, as well as opportunity costs.

Occupational Stress

The stress experienced as a result of job demands and pressures that do not match a person's knowledge, skills, or abilities and challenge their ability to cope.

Stress

The body's response to perceived threats or challenges, which can be physical, emotional, or psychological in nature.