Question: A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of the purchase price in each of the next

A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of the purchase price in each of the next 3 years. If you pay the entire bill immediately, you can get a discount of 7% on the purchase price. Assume the product sells for $4.

a-1. Calculate the present value of the payments if you can borrow or lend funds at an interest rate of 4 percent.

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

a-2 Which is a better deal?

b-1. Calculate the present value if the payments on the 4-year installment plan do not start for a full year.

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

b-2. Which is a better deal?

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