9 ) Short - term versus longer - term borrowing ( LOG - 3) Sauer Food Company has decided to buy a new computer system with an expected life of three years The cost is $ 150 , 000 . The company can borrow $ 150 000 for three years at 10 percent annual interest or for one year at 8 percent annual interest . How much would Sauer Food Company save in interest over the three - year life of the computer system if he one year loan is utilized and the loan is rolled over ( reborrowed ) each year at the same 8 percent ate ? Compare this to the 10 percent three - year loan . What if interest rates on the 8 percent loan go up to 13 percent in year 2 and 18 percent in year 3 ? What would be the total interest cost compared to the 10 percent , three year loan