For the situation stated in Problem 34, let the interest on borrowed money go from 7 percent to 20 percent in 1 percent increments. For each borrowing rate, which repayment method is preferred? Do your answers match what is predicted in the text?

Data from problem 34

Steinway R&D is pursuing the development of an attachment that can easily clean the inside of grand pianos. This innovation will require a loan of $500,000 for fabrication and testing of several units. Inflation is 3.9 percent, and the loan is available to them at a rate of 10 percent. Their combined MARR is 17 percent. The loan is to be paid back over 4 years. What is the amount to be paid at the end of each year and the PW (using both then-current and constant-dollar approaches) if repayment follows

a. Method 1 (pay accumulated interest each year and principal at the end of the last year)?

b. Method 2 (make equal annual principal payments each year, plus interest on the unpaid balance)?

c. Method 3 (make equal annual payments)?

d. Method 4 (make a single payment of principal and interest at the end of the last year)?