Tim Gillespie Week 3

# Tim Gillespie Week 3 - Tim Gillespie Week 3 Chapter 6#8...

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Tim Gillespie Week 3 Chapter 6 #8 Year Principal Years Interest Rate Total Interest Three Year Loan 1 to 3 \$150,000 3 10% \$45,000 One Year Loan 1 \$150,000 1 8% \$12,000 2 \$150,000 1 8% \$12,000 3 \$150,000 1 8% \$12,000 \$36,000 If interest went up on one year loan One Year Loan 1 \$150,000 8% \$12,000 2 \$150,000 13% \$19,500 3 \$150,000 18% \$27,000 \$58,500 If Sauer Food Company decided to finance the computer system with the one year loan at a fixed APR of 8%, they would save approximately \$9,000 in interest costs. With the three year loan, the interest cost is \$45,000 compared to only \$36,000 if the loan is reborrowed each year. If Sauer Food Company went with a one year loan there is a chance that the interest rates could go up each year. In this case in the 2nd year the interest went up to 13% and up to 18% the third year. The result of these increases shows the total interest cost at \$58,500 compared to the \$45,000 cost of the three year loan. The best choice for Sauer in this case would be the three year loan at 10%.

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Tim Gillespie Business Finance Week 3 Baily Comprehensive Problem A/R Before Policy Change After Policy Change A. Units 20000 250000
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## This note was uploaded on 02/25/2012 for the course FINANCE 410 taught by Professor Conway during the Spring '12 term at Regis University.

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Tim Gillespie Week 3 - Tim Gillespie Week 3 Chapter 6#8...

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