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    Irene has made Sara an offer on the purchase of a capital as

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    Irene has made Sara an offer on the purchase of a capital asset. Irene will pay (1) $200,000 cash or (2) $50,000 cash and a 6% installment note for $150,000 guaranteed by City Bank of New York. If Sara sells for $200,000 cash, she will invest the after tax proceeds in certificates of deposit yielding 6% interest, Sara's cost of the asset is $25,000. Why would Sara prefer the installment sale?

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    Irene has made Sara an offer on the purchase of a capital asset. Irene will pay (1) $200,000 cash or (2) $50,000 cash and a 6% installment note for $150,000 guaranteed by City Bank of New York. If Sara sells ...

    Solution Summary

    Irene has made Sara an offer on the purchase of a capital asset. Irene will pay (1) $200,000 cash or (2) $50,000 cash and a 6% installment note for $150,000 guaranteed by City Bank of New York. If Sara sells for $200,000 cash, she will invest the after tax proceeds in certificates of deposit yielding 6% interest, Sara's cost of the asset is $25,000. Why would Sara prefer the installment sale?

    $2.19

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