Homework Help: Finance

Posted by Nancy on Monday, November 8, 2010 at 10:19pm.

Sauerfood company has decided to buy a new computer system with an expected life of 3 yrs. the cost is 150,000.the comapny can borrow $150,000 for 3yrs at 10% annual interest or for one yr at 8% annual interest. How much wld sauer save in interest over the 3 yr life of the computer system if the one year loan is utilized and the loan is rolled over each yr at the same 8% rate?compare this to the 10% 3 yr loan. what if interest rates on the 8% loan go up by 13% in year 2 and 18% in yr 3? what would be the total interest cost compared to the 10% ,3 year loan?

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