Determine which plan is less costly

Reference no: EM131947270

Question: Boatler Used Cadillac Co. requires $810,000 in financing over the next two years. The firm can borrow the funds for two years at 7 percent interest per year. Mr. Boatler decides to do forecasting and predicts that if he utilizes short-term financing instead, he will pay 5.25 percent interest in the first year and 9.55 percent interest in the second year. Assume interest is paid in full at the end of each year.

a. Determine the total two-year interest cost under each plan.

Interest Cost

Long-term fixed-rate $

Short-term variable-rate $

b. Which plan is less costly?

Short-term variable-rate plan

Long-term fixed-rate plan

Reference no: EM131947270

Questions Cloud

Positive numbers-corresponding squares : Write program which prints the following columns: the first 100 whole positive numbers, their corresponding squares, their corresponding cubes.

What will be the annual rate of return on the bond : What will be the annual rate of return on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places).

Searching for a value : If a sequential search function is searching for a value that is sorted in the last element of a 10000 element array

Research about the number systems : Research about the following number systems: Binary, Octal, Hexadecimal, and ASCII, and Unicode and then merge the information together

Determine which plan is less costly : Boatler Used Cadillac Co. requires $810,000 in financing over the next two years. The firm can borrow the funds for two years at 7 percent interest per year.

Research internet use policies on the internet : Research Internet use policies on the Internet. Find the actual policies of real companies.

What is the current yield : A bond has a $1,000 face value and a $1, 146 market value. The bond pays interest semi-annually, has a yield-to-maturity of 7.47 percent, and matures.

Are businesses ready for smart dust : Are businesses ready for Smart Dust? How should a company begin to adapt its current processing and processes in order to take advantage

Who should make the final decision : How should such a decision whether to install CCTV in such nonpublic areas be made? Who should make the final decision?

User Account

All Pages