Neco Model Questions Vol1 2017 Commerce Question 24

Practice objective / multiple choice question 24 from the 2017 Neco Model Questions Vol1 Commerce examination.

Neco Model Questions Vol1 2017 Commerce Objective / Multiple Choice Medium Difficulty
Question 24 NECO_MODEL_QUESTIONS_VOL1 • 2017 • COMMERCE • objective

A retailer wishes to acquire equipment with a list price of \(\text{₦}1,200,000\). Option A is a cash purchase that gives a 5\% discount on the list price. Option B is a hire‑purchase arrangement over 4 years with a down payment of 30\% of the list price, equal annual principal repayments, and interest of 12\% per annum on the reducing balance. All interest is paid each year together with the principal installment, and the remaining balance is cleared at the end of the fourth year. Which option has the lower total cost to the retailer? Show the total cash outflow for each option.

Answer Options

A. Hire‑purchase is cheaper; total cash cost = ₦1,140,000, hire‑purchase total cost = ₦1,100,000
B. Cash purchase is cheaper; total cash cost = ₦1,200,000, hire‑purchase total cost = ₦1,452,000
C. Cash purchase is cheaper; total cash cost = ₦1,140,000, hire‑purchase total cost = ₦1,380,000
Correct Answer D. Cash purchase is cheaper; total cash cost = ₦1,140,000, hire‑purchase total cost = ₦1,452,000
Correct Answer
D
Correct Option:
Cash purchase is cheaper; total cash cost = ₦1,140,000, hire‑purchase total cost = ₦1,452,000

About This Question

This is Neco Model Questions Vol1 2017 Commerce Question 24. It is one of the objective questions from the 2017 Neco Model Questions Vol1 Commerce examination.

Difficulty level: Medium .

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