Exercise 5-13 (Algo) Present value; ordinary annuity (LO 5-8)

Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options:

Pay $25,000 today for the car.

Pay $2,000 at the end of each quarter for three years.

Required:

1-a. Assuming Denzel uses a discount rate of 12% (or 3% quarterly), calculate the present value.

1-b. Which option gives him the lower cost?

Assuming Denzel uses a discount rate of 12% (or 3% quarterly), calculate the present value. Note: Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places. (FV of $1, PV of $1, FVA of $1, and PVA of $1)

	Present Value
Option 1	$25,000.00
Option 2