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Sally wants to buy a Ford Mustang. The MSRP is $35,000. Ford offers a purchase financing plan with no money down and 48 end-of-month payments of $800. Should she buy the car for cash or take Ford's purchase financing? Assume that she has the cash and could invest it to earn 5%. Calculate the present value of each alternative and enter your answer as the PV of the cash purchase minus the PV of the financing.

User Luke Wenke
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1 Answer

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Sally should pay cash to buy the car because its present value is higher.
Price: 28,442
Monthly payment: 450
N= 84
Opportunity cost = 6%
User Mirza
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