Question: E 5 . 1 8 ( LO 4 ) ( Least Costly Payoff ) Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic

5.18 (

4) (

Least Costly Payoff

)

Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement. It can either make immediate payment of $

2, 600, 000,

or it can make annual payments of $

300, 000

for

15

years, each payment due on the last day of the year.

Instructions

Which method of payment do you recommend, assuming an expected effective interest rate of

8 %

during the future period?

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