Sauer Food Company has decided to buy a new computer system with an expected life of three years. The cost is $340,000. The company can borrow $340,000 for three years at 12 percent annual interest or for one year at 10 percent annual interest. Assume interest is paid in full at the end of each year.

What if interest rates on the 10 percent loan go up to 15 percent in year 2 and 18 percent in year 3? What would be the total interest cost compared to the 12 percent, three-year loan?

	Interest
Fixed-rate 12% loan	?
Variable-rate loan	?
Additional interest cost	?