&BTooling Ltd. is assessing two available options for the purchase of new equipment with a negotiated cash price of $100,000. The manufacturer is willing to accept a down payment of20% of the purchase price and an instalment note for the balance. The note would require quarterly fixed principal payments (plus interest) starting October 1, 2020, for a period of two years.M&Bhas a proposal from its bank for an instalment loan for two years that requires a fixed blended monthly payment (including both principal and interest) starting August 1, 2020. The loan would be for80% of the equipment's purchase price. The current market rate of interest is8%. Both contracts have an interest rate of8%.

Is there any measurement uncertainty in determining which option is best forM&B?

Yes

No

Which discounted cash flow approach should be used in the comparison of the two alternatives?

Expected Cash Flow Approach

Traditional Discounted Cash Flow Approach