Assume that you work for Theater-At-Home, Inc., a retail company that sells basement movie projection systems for $10,000. Your boss is considering two types of promotions:

1. Offering customers a $1,000 coupon that they can apply to future purchases, including the purchases of annual maintenance.

2. Offering credit terms that allow payments of $2,000 down and $2,000 per year for four years starting one year after the purchase. Theater-At-Home would have to borrow money at 7 percent interest to finance these credit arrangements.

Divide the class into groups. After discussing the relative merits of these two plants, including their implications for accounting and the time value of money, each group should decide on the best alternative. The groups may recommend changes in the plans. A representative of each group should report the group’s finding to the class.