Reference no: EM133363197

Question

Some automobile companies offer consumers either cash back upon purchasing or discounted interest rates on financing. Suppose you need to purchase an automobile for your company whose price is $20,000 and you are offered the option of $2,000 cash back or 0% interest for 48 months (instead of the 4% you were initially quoted on this loan). How do you determine which of these options is best for your company? (For simplicity, you can assume all of a year's loan payments are paid at the end of the year rather than in 12 monthly payments.) Would your decision change if you were initially offered a 7% interest rate on the loan instead of 4%? Explain.