You are in the market to purchase a new automobile. Marginal Deal , Inc. will give you $500 off the list price on a $10,000 Porsche deal. Consider the following historical events relating to your automobile purchase.
A. You can get the same care from Great Deals, Inc. if you pay $4000 down and the rest at the end of two years. If the interest rate were 12%, where would you purchase the car?
B. Great Deals, Inc. has revised offer. You now pay $2000 down, $3000 at the end of the first year and $5000 at the end of the second year. If the interest rate is still 12%, where would you buy the new Porsche?
C. Marginal Deal, Inc., in turn, makes a new offer. You pay $10,000, but you can borrow the sum from the dealer at 0.5% per month for 36 months even though the going market rate is 1% per month, with the first payment made when the car is delivered. If you accept the offer, (1) what would your monthly payments be? and (2) what would the cost of the Porsche be to you?