Assuming the same facts as those in E6.18 except that the payments must begin now and be made on the first day of each of the 15 years, what payment method would you recommend?
Assume that Aoki Ltd. has a contractual debt outstanding. Aoki has available two means of settlement: It can either make immediate payment of ¥3,500,000, or it can make annual payments of ¥400,000 for 15 years, each payment due on the last day of the year (yen in thousands)
Instructions
Which method of payment do you recommend, assuming an expected effective-interest rate of 8% during the future period?