S Problem 6-12 Vincent Black Lightning requires $1,040,000 in financing over the next three years. The firm can borrow the funds for three years at 7 percent interest per year. Vincent decides to do forecasting and predicts that if he utilizes short-term financing instead, he will percent interest in the first year, 5 percent in the second year, and 11 percent interest in the third year. pay 3 a. Determine the total three-year interest cost under each plan. Fixed cost financing Variable short-term financing b. Which plan is less costly? O Fixed cost plan O Short-term plan Total Interest cost $ $ 4

Vincent Black Lightning requires $1,040,000 in financing over the nex three years. The firm can borrow the funds for three years at 7 percent interest per year. Vincent decides to do forecasting and predicts that if he utilizes short-term financing instead, he will pay 3 percent interest in the first year, 5 percent in the second year, and 11 percent interest in the third year. a. Determine the total three-year interest cost under each plan. b. Which plan is less costly? Fued cost plan Short-term plan