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Math Help - Finance question about cash or installment options

  1. #1
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    Finance question about cash or installment options

    Hello everyone,


    I have the answer for this problem, but I am trying to figure out how to come to this solution. Can anyone help? Thank you in advance for your help!



    Adana Corporation is interested in buying a building for $500,000 in cash, or it may pay for it in 50 monthly installments of $12,000 each. If the cost of capital for Adana is 9%, which method should it use?
    [Present Value of installments $498,797 (cheaper option) ]
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  2. #2
    MHF Contributor
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    Ottawa, Canada
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    Are you asking HOW is the $498,797 calculated?
    If so, google "present value of annuity".
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