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11-3 Quality Photo Printing
As a professional photographer, Jillian had
seen a significant shift in customer demand
for digital technologies in photography. Many
customers, attempting to save a few dollars,
had invested in low-end digital cameras (and
even lower-end printers) to avoid processing
fees typically associated with printing
photographs. The end result, for most
customers, was a bounty of digital
photographic images but with limited options
for creating quality printed digital
photographs.
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Jillian was hoping to tap into this underserved market by offering customers superior quality
digital printing using advanced pigment inks to produce exquisite color prints. To provide this
service, Jillian needs to purchase a state-of-the-art photo printer she found listed through a
photography supply company for $8,725, plus sales tax of 5.5%. The supply company is
offering cash terms of 3/15, n/30, with a 1.5% service charge on late payments, or 90 days
same as cash financing if Jillian will apply and is approved for a company credit card. If she is
unable to pay within 90 days under the second option, she would have to pay 24.9% annual
simple interest for the first 90 days, plus 2% simple interest per month on the unpaid balance
after 90 days. Jillian has an excellent credit rating, but is not sure what to do.
1. If Jillian took the cash option and was able to pay off the printer within the 15-day
discount period, how much would she save? How much would she owe?