EXAMPLE 6.9 Jothi Lakshimi has arranged to buy some home recording equipment. She estimates that it will have a five year useful life and no salvage value at the end of equipment life. The dealer, who is a friend has offered Jothi Lakshimi two alternative ways to pay for the equipment. (a) Pay Rs. 60,000 immediately and Rs. 15,000 at the end of one year. (b) Pay nothing until the end of fourth year when a single payment of Rs. 90,000 must be made. If Jothi Lakshimi believes 12% is a suitable interest rate, which alternative is the best for her?