Cayman Diving, Inc., needs to acquire a new dive boat. The seller will accept a noninterest- bearing

Question:

Cayman Diving, Inc., needs to acquire a new dive boat. The seller will accept a noninterest- bearing note for $400,000 due in four years or $250,000 in cash. The company’s incremental cost of borrowing is 10%.

Required:
Which option should Cayman Diving select? Would your answer change if Cayman’s incremental borrowing rate was 13%? Why?