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Choosing the best buy

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The following is an excerpt from a conversation between Eric Jackson and Carlie Miller. Eric is debating whether to buy a stereo system from First Audio, a locally owned electronics store, or Dynamic Sound Systems, an online electronics company.

Eric: Carlie, I don't know what to do about buying my new stereo.

Carlie: What's the problem?

Eric: Well, I can buy it locally at First Audio for $890.00. But Dynamic Sound Systems has the same system listed for $899.99.

Carlie: So what's the big deal? Buy it from First Audio.

Eric: It's not quite that simple. Dynamic Sound Systems said something about not having to pay sales tax, since I was out of state.

Carlie: Yes, that's a good point. If you buy it at First Audio, they'll charge you 6% sales tax.

Eric: But Dynamic Sound Systems charges $13.99 for shipping and handling. If I have them send it next- day air, it'll cost $44.99 for shipping and handling.

Carlie: I guess it is a little confusing.

Eric: That's not all. First Audio will give an additional 1% discount if I pay cash. Otherwise, they will let me use my VISA, or I can pay it off in three monthly installments.

Carlie: Anything else???

Eric: Well... Dynamic Sound Systems says I have to charge it on my VISA. They don't accept checks.

Carlie: I am not surprised. Many online stores don't accept checks.

Eric: I give up. What would you do?

1. Assuming that Dynamic Sound Systems doesn't charge sales tax on the sale to Eric, which company is offering the best buy?

2. What might be some considerations other than price that might influence Eric's decision on where to buy the stereo system?

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Solution Summary

This solution illustrates how to compare sales offers quantitatively and qualitatively.

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If Eric can pay cash, and accepts Dynamic's regular shipping, here is how the two companies compare:

See attached

Alternatively, if Eric uses his Visa and gets standard shipping, here is how the two companies compare:

See attached

Furthermore, if Eric uses his Visa and gets next-day air, here is how the two companies compare:

See attached

Finally, if Eric can pay cash, and wants Dynamic's next-day shipping, here is ...

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