Car City Motors Ltd. in Happy Valley (Hong Kong) is offering free credit on a new...

Car City Motors Ltd. in Happy Valley (Hong Kong) is offering free credit on a new $10,000 car. You pay $1,000 down and then $300 a month for the next 30 months. Wai Cheong Motors Ltd. in Wan Chai does not offer free credit but will give you $1,000 off the list price. If the interest rate is 10 percent a year, which company is offering the better deal?

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Expert Solution

we should choose deal which has lowest present value

pv of deal at car city motors is 8934(workings in excel sheet)

pv of deal at cheong motors is 9000

so car city motors is offering better deal

jeff jeffy answered 1 year ago

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