To determine which payment plan the real estate investor would prefer, we need to compare the present value of each payment option. Assuming a discount rate of 0%, meaning no time value of money is considered, we can directly compare the payment amounts.
1. Payment of $2,000 at the first of each month: This results in a total payment of $24,000 over the 12-month lease.
2. Upfront payment of $24,000: This option requires paying the full amount at the beginning of the lease.
3. Payment of $2,000 at the end of each month: Similar to option 1, this results in a total payment of $24,000 over the 12-month lease.
4. Upfront payment of $12,000 and $12,000 half-way through the lease: This option requires paying $12,000 at the beginning of the lease and another $12,000 halfway through the lease.
Since all the payment options have a total cost of $24,000, the real estate investor would likely prefer the payment plan that offers more flexibility or matches their cash flow preferences. Options 1 and 3 provide the investor with the option to pay monthly, while options 2 and 4 require a larger upfront payment. The choice would depend on the investor's financial situation and preferences.