What cash amount should grandguys be willing to accept

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Jim and Jane would like to purchase a home theatre system for their newly renovated home. After extensive research online and visiting at a few local electronics store, they would like to purchase the newly released speaker package for $3,000.

Problem (a) Mega Electronics are currently offering a deal of 12 equal monthly repayments with no interest charges. If Mega Electronics values money at 8.4% per year compounded monthly, what cash amount should Mega Electronics be willing to accept instead of the no-interest plan?

Problem (b) Alternatively, GrandGuys offers the same no-interest plan but require a 10% deposit and an establishment fee of $15 both of which are payable immediately. GrandGuys also charges an account keeping fee of $2.95 per month due with each payment. What cash amount should GrandGuys be willing to accept with its no-interest plan on the speaker package ticketed at $3,000? In this case you can assume GrandGuys value money at 9.6% per year compounded monthly.

Problem (c) Which shop offers a better deal for Jim and Jane? Explain briefly (2-3 sentences).

Reference no: EM132944725

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