Which plan is less costly

Reference no: EM13297440

Short-term versus longer-term borrowing [LO3] Boatler Used Cadillac Co. requires $880,000 in financing over the next two years. The firm can borrow the funds for two years at 10 percent interest per year. Mr. Boatler decides to do forecasting and predicts that if he utilizes short-term financing instead, he will pay 6.75 percent interest in the first year and 6.75 percent interest in the second year. (a) Determine the total two-year interest cost under each plan. (Omit the "tiny_mce_markerquot; sign in your response.) Interest cost Fixed cost financing $ Variable short-term financing $ (b) Which plan is less costly? Short-term plan Fixed cost plan.

Reference no: EM13297440

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