Crown Ltd. has decided to borrow $50,000,000 via a euro-dollar floating rate loan for 4 years. It must decide between two competing loan offerings from two banks:

Century bank has offered the four-years loan at LIBOR+1.5% with an up-front initiation fee of 1%. Liberty bank however, has offered LIBOR+3%, but with no initiation fees up-front, for the same term and principal. Both banks reset the variable rates at the end of each year. LIBOR is currently 5% and Crown's financialadvisory forecasts that LIBOR will rise by 0.5% per year. Crown'scost of capital(WACC) is 8.5%. Theforecasted cash flows for both loan offers are as follow:

BankYear 0Year 1Year 2Year 3Year 4Century$49,500,000($3,500,000)($3,750,000)($4,000,000)($54,250,000)Liberty$50,000,000($4,250,000)($4,500,000)(4,750,000)($55,000,000)

Which loan proposal do you recommend for Crown Ltd.(Liberty or Century)?

Which loan proposal do you NOT recommend for Crown Ltd.(Liberty or Century)?