Freyensee just acquired office furniture that had a list price of $400,000. The furniture store said that it would finance the entire price at 0 percent interest by letting the company make eight quarterly payments of $50,000 starting three months from the date of purchase.
A. If Freyensee Company can borrow money at 8 percent, what is the cost of the office furniture?
B. What is the cost of the office furniture if Freyensee Company usually borrows money at 6 percent?
C. What is the cost of the office furniture if Freyensee Company agrees to make four semiannual payments of $100,000 each if it usually borrows money at 8 percent?
Tara Storey can afford car payments of $400 per month for five years. The interest rate on car loans is 6 percent.
A. How much can she spend for a car?
B. How much can she spend for a car if she could get an interest rate of 4 percent?
C. How would your answer to part A change if she could make a $2,000 down payment?
D. How would your answer to part B change if she could make a $2,000 down payment?