Question

Sauer Food Company has decided to buy a new computer system with an expected life of three years. The cost is $330,000. The company can borrow $330,000 for three years at 11 percent annual interest or for one year at 9 percent annual interest. Assume interest is paid in full at the end of each year. a. How much would Sauer Food Company save in interest over the three-year life of the computer system if the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same 9 percent rate

Answer 1

the save in interest over the 3 years in the case of 9% rate of interest is $89,100

Step-by-step explanation:

a. The computation of the save in interest over the 3 years in the case of 9% rate of interest is given below:

= $330,000 × 9% × 3 years

= $89,100

Hence, the save in interest over the 3 years in the case of 9% rate of interest is $89,100

The same would be considered and relevant too