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Suppose your company is purchasing equipment for $2,000,000. You are presented two choices to finance these assets: an installment loan for the full amount
Suppose your company is purchasing equipment for $2,000,000. You are presented two choices to finance these assets: an installment loan for the full amount at 10% for 5. years or to issue non-cumulative, $125 par, 10% preferred stock. The payment on the installment is $527,593 per year for 5 years: Period Begin Balance Installment Interest Reduction Ending Balance 1 2,000,000 527.593 200,000 327,593 1,672,407 2 1,672,407 527,593 167,241 360,352 1,312,054 3 1,312,054 527,593 131,205 396.388 915,667 4 915,667 527,593 91,567 436,026 479,640 5 479,640 527,593 47,953 479,640 Which of these options would you choose? Why? Please respond once or twice to the topic and two or three times to your classmates for a total of four posts to earn full credit.
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