Determine the total two-year interest cost

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Boatler Used Cadillac Corporation needs $80,000 in financing over the next 2-years. The company can borrow  funds for 2-years at 9% interest every year. Mr. Boatler decides to do economic forecasting and determines that if he utilizes short-term financing instead, he will pay 6.75 percent interest in the first year and 10.55 percent interest in the second year. Determine the total two-year interest cost under each plan. Which plan is less costly?

Reference no: EM1366918

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