Case Name :      Replacing El Poderoso

Authors :           Fredrik Odegaard

Source :             Ivey Publishing

Case ID :            909E25

Discipline :        Finance

Case Length :    02 pages

Solution Sample availability : YES

Plagiarism : NO (100% Original work)

A professor is considering buying a new car and is evaluating two models, one with air conditioning and a comfort package, the other with no extras. The two cars are relatively close in price but still above his initial budget, and he is wondering how much he might be able to negotiate the price. A factor that complicates the matter is that the car with the comfort package has a lower interest rate. The professor therefore needs to understand what the net present value of the difference in the two payment plans is.