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Maxco Ltd. intends to raise $300,000 to upgrade its existing computer system. The supplier of the computer system has agreed to finance the purchase of the system with a down payment of $100,000, followed by five annual instalments of $48,780.50 to be made at the end of each year. Alternatively, Elite Bank has also offered to lend Maxco the needed sum of $300,000. The bank requires a lump-sum payment of $425,000 in five years.
Problem a. What is the annual interest rate on the loan from the computer supplier?
Problem b. What is the annual interest rate on the loan from Elite Bank?
Problem c. Based on your analysis, from whom should the money be borrowed?
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