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To avoid a court action, Jeeps Co is thinking of offering to repay the creditor it owes
$300,000 in instalments as follows (all figures in $000)
Now 1 month 2 months 3 months 4 months 5 months
75 45 45 45 45 45
How much will Jeeps Co save, in present value terms, if the creditor accepts the
instalment offer instead of Jeeps having to pay in full immediately (to the nearest
$00)?
(Annual cost of capital is given at 12%)Sir can u pls tell me how can we find monthly interest rate?
Is it by [(1+r)^12 -1] =0.12
Or
Is there any other easy method?
Kindly help
ThanksThe only way is the way that you have described (although the examiner has never expected you to do monthly discounting in the exam).
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