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 take a discount of 7% from the purchase price. Assume the product sells for $100. a-1. Calculate the present value of the payments if you can borrow or lend funds at an interest rate of 4 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.) PV of installment plan a-2 Which is a better deal? O Installment plan O Pay in ful b-1. Calculate the present value if the payments on the 4-year installment plan do not start for a ful year. (Do not round intermediate calculations. Round your answer to 2 decimal places.) PV of installment plan b-2. Which is a better deal?

A cash flow's discounted present value is its present value.When we have investment options that have cash flows at various points in time, this is helpful.A common basis for comparison is provided by computing present values in this situation.

The present value of each option must be calculated because cash outflows will occur at different times for each option.

25% down and 25% to go.

The idea of present value states that the same amount of money today will be worth more in the future.To put it another way, money received in the future has less value than money received today.Getting $1,000 today is worth more than $1,000 a long time from now.

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