Mr. and Mrs. Janus operate a restaurant business as a sole proprietorship. The couple has decided to purchase $85,000 of new kitchen equipment for the restaurant. They also want to buy two new automobiles—one for their personal use and one for their 19-year-old son’s personal use. The two automobiles will cost $65,000. Mr. and Mrs. Janus have $70,000 in a savings account that they can use to partially fund these purchases. They intend to borrow the additional $80,000 from a local bank at 7 percent annual interest. What steps should the couple take to minimize the after-tax cost of the borrowed funds?
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