Question - Evaluation of Purchase Options
Amos Excavating Inc. is purchasing a bulldozer. The equipment has a price of $100,000. The manufacturer has offered a payment plan that would allow Amos to make 10 equal annual payments of $15,582, with the first payment due one year after the purchase. (Hint: Use tables in text.)
(a) How much total interest will Amos pay on this payment plan?
(b) Amos could borrow $100,000 from its bank to finance the purchase at an annual rate of 8%. Should Amos borrow from the bank or use the manufacturer's payment plan to pay for the equipment?