Your firm is considering the purchase of a new office phone system. You can either pay $32,000 now, or $1000 per month for 36 months.
a. Suppose your firm currently borrows at a rate of 6% per year (APR with monthly compounding).
Which payment plan is more attractive?
b. Suppose your firm currently borrows at a rate of 18% per year (APR with monthly compounding).
Which payment plan would be more attractive in this case?