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Boatler Used Cadillac Co. requires $900,000 in financing over the next three years. The firm can borrow the funds for three years at 6 percent
Boatler Used Cadillac Co. requires $900,000 in financing over the next three years. The firm can borrow the funds for three years at 6 percent interest per year. Mr Boatler decides to do forecasting and predicts that if he utilizes short-term financing instead, he will pay 5 percent interest in the first year, 2 percent in the second year, and 10 percent interest in the third year. a. Determine the total three year interest cost under each plan. Total Interest cost $ Fixed cost financing Variable short-term financing $ b. Which plan is less costly? O Fixed cost plan O Short-term plan
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