My TV provider offers me a monthly package, but lets me prepay for a longer duration at lower price. Here are the options:
- ₹100 monthly
- ₹567 semi-annually
- ₹1,098 per annum
- ₹2,100 biennial
All these are prepaid, not postpaid.
Assume that I have an investment available that generates a post-tax return of 12%. Which of these options works out to be the cheapest, and in what order do they rank?
Put differently, how much return does my investment need to have for it to be profitable to go for (say) the monthly pack over the annual one?
I understand that by prepaying, I will lose money if I decide to switch providers before the duration I've prepaid for is up.
PS: I googled for "NPV calculator" and "discount rate calculator" but they seem to handle a different situation from this one — they assume that you're investing a certain amount of money in (say) a factory that will generate regular cash flows. That's not the case here. Besides, I never know whether to enter numbers with a positive or negative sign, and they then tell me that at least one of the numbers must be negative, etc.