Compare funding options using only the terms the case supplies. Work out total cost, monthly payment and whether the payment fits the business, and let the figures decide.
This lesson is part of finance decisions in an original case. It follows distinguishing the amount needed from purpose and timing.
Why the word “supplied” matters
Every rate and term on this page is invented. They are practice figures, not offers, and they are not advice for any real person or business.
In a real situation, terms come from the lender and change over time. In a case question, the terms are given, so they are the only figures you may use.
The three-part grid
For each option, fill three cells. Then compare across.
- Total cost: what is paid in total for the equipment or loan.
- Monthly payment: total divided by the number of months.
- Fit: does the monthly payment fit the case’s surplus?
Worked example: two supplied options
Dapur Kek Nurul needs RM18 000 of equipment. The owner’s monthly surplus is RM1 200. The case supplies two options.
Option X: a loan of RM15 000 at a flat 6% a year over 3 years, with the rest from savings. Option Y: the equipment supplier’s instalment plan: RM3 000 deposit, then RM1 400 each month for 12 months.
Option X interest: 15 000 × 6% × 3 = RM2 700. Loan total: 15 000 + 2 700 = RM17 700. Monthly: 17 700 ÷ 36 = RM492 (to the nearest ringgit).
Option Y total: 3 000 + 12 × 1 400 = 3 000 + 16 800 = RM19 800. That is RM1 800 more than the equipment price, and the monthly payment of RM1 400 is higher than the surplus.
| Option | Total cost | Monthly | Fits RM1 200 surplus? |
|---|---|---|---|
| X | RM17 700 plus RM3 000 from savings | RM492 | Yes |
| Y | RM19 800 | RM1 400 | No, short by RM200 |
The mistake of bringing in outside figures
The common slip is to add a rate from memory. “Banks usually charge 4%, so Option X would cost less.”
The case supplied 6%, and the claim about other banks is not in the case. Rewrite: “Option X’s supplied rate of 6% gives each monthly payment of RM492, which fits the RM1 200 surplus.”
Check yourself
The case adds Option Z: a loan of RM12 000 at a flat 5% a year over 2 years. Find its total and monthly payment, and say whether it fits the surplus.
Answer
Interest = 12 000 × 5% × 2 = RM1 200. Total = 12 000 + 1 200 = RM13 200. Monthly = 13 200 ÷ 24 = RM550.
RM550 is below the RM1 200 surplus, so Option Z fits. Whether it is enough money for the whole equipment cost is a separate check.
What to study next
Next, see how buying compares with leasing for cash in the first month. Continue with explaining a cash-flow consequence of buying rather than leasing.
The business case answer planner helps you keep each option’s three figures together. For a teacher to check your comparisons, see online one-to-one Business tuition.