The Lee-Key Roof Company has offered a small company two method by which to pay for some needed roof repairs. Method 1 involves a payment of $5000 as soon as the job done, i.e., now. Method 2 allows the company to defer payment for 2 years, at which time a payment of $8000 would be required. If the interest rate is 12% per year, make your decision which method is better than another and why?
The Lee-Key Roof Company has offered a small company two method by which to pay for some needed roof repairs. Method 1 involves a payment of $5000 as soon as the job done, i.e., now. Method 2 allows the company to defer payment for 2 years, at which time a payment of $8000 would be required. If the interest rate is 12% per year, make your decision which method is better than another and why?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
The Lee-Key Roof Company has offered a small company two method by which to pay for some needed roof repairs. Method 1 involves a payment of $5000 as soon as the job done, i.e., now. Method 2 allows the company to defer payment for 2 years, at which time a payment of $8000 would be required. If the interest rate is 12% per year, make your decision which method is better than another and why?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education