MMF compares two financing plans for $600,000 of permanent asset needs. Plan A
uses five-year financing at 9%. Plan B uses one-year financing currently at 6%, with the goal of renewing that financing each year when the prior year's loan ends. Which assessment of the two plans is most
accurate?

Question

Answer

The plans have equal interest cost because they finance the same assets

Answer

Plan B has lower interest cost in year 1 but greater refinancing risk

Answer

Plan B has the lower interest cost in year 1 and no refinancing risk

Answer

Plan A has the lower interest cost in year 1 and greater refinancing risk

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MMF compares two financing plans for $600,000 of permanent asset needs. Plan A u...

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