Based on your calculations, for each of the financing scenarios, what amount of net cash flow would the company receive each year?

As stated in the case, cash flows are $750,000 for Year 1, $1,000,000 for Year 2, and $1,250,000 for Year 3.

To determine net cash flow, simply subtract annual debt service payments from the projected cash flows. The following tables detail the two scenarios.

Scenario #1: Sherman Bank Year Cash Flow Debt Service Payments Net Cash Flows 1 $750,000 ($755,143) ($5,143)

2 $1,000,000 ($755,143) $244,856 3 $1,250,000 ($755,143) $494,856 Scenario #2: Clayton Bank Year Cash Flow Debt Service Payments Net Cash Flows 1 $750,000 ($687,774) $62,226 2 $1,000,000 ($687,774) $312,226 3 $1,250,000 ($687,774) $562,226