Washing machine costs 25000.The washing machine company is trying to increase its sales. Thus it has offered to sell you the washing machine for $23,000 or charge you $25,000 and lend you $20,000 of the purchase price at 9%. Thus you will make a $5,000 down payment and make the annual payments based on a 9% (subsidized) rate or you will make a $3000 down payment and make the five annual payments without the subsidized rate (you have to pay 10% rate )How much cheaper is the discounted financing option? How will be the cashflows for two loans and compare their present value. Correct discount is 10% when you value two loans.
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