Need help Boatler Used Cadillac Co. requires $810,000 in financing overthe next two years. The firm can borrow the funds for twoyears at 7 percent interest per year. Mr. Boatler decides to doforecasting and predicts that if he utilizes short-termfinancing instead, he will pay 5.25 percent interest in the firstyear and 9.55 percent interest in the second year. Assumeinterest is paid in full at the end of each year.a. Determine the total two-year interest cost under each plan.b. Which plan is less costly? Short-term variable-rate plan orLong-term fixed-rate plan?

a. Determine the total two-year interest cost under each plan.Long-term fixed-rate plan:The interest…

Answered: Boatler Used Cadillac Co. requires…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 19P

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Boatler Used Cadillac Co. requires $870,000 in financing over the next two years. The firm can borrow the funds for two years at 9 percent interest per year. Ms. Boatler decides to do forecasting and predicts that if she utilizes short-term financing instead, she will pay 5.75 percent interest in the first year and 10.55 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. Long-term fixed-rate Short-term variable-rate b. Which plan is less costly? Interest Cost O Short-term variable-rate plan O Long-term fixed-rate plan
Boatler Used Cadillac Co. requires $850,000 in financing over the next twoyears. The firm can borrow the funds for two years at 12 percent interest peryear. Mr. Boatler decides to do forecasting and predicts that if he utilizes shortterm financing instead, he will pay 7.75 percent interest in the first year and13.55 percent interest in the second year. Determine the total two-year interestcost under each plan. Which plan is less costly?
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