Moira's Fruit Wine is planning to expand the amount of wine bottle inventory they are holding,...

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Moira's Fruit Wine is planning to expand the amount of wine bottle inventory they are holding, and are evaluating two plans to finance the additional inventory. The required additional financing for the inventory is $100,000. Plan A would finance 80% of the inventory using long term financing, and the other 20% using short term financing. Plan B would finance $35,000 of the inventory using long term financing, and the remainder using short term financing. Annual interest rates are currently 5% for short term financing, and 8% for long term financing. Compute the interest expense cost of both plans. Provide a brief comment on which plan is more aggressive. (6 marks) Moira's Fruit Wine is planning to expand the amount of wine bottle inventory they are holding, and are evaluating two plans to finance the additional inventory. The required additional financing for the inventory is $100,000. Plan A would finance 80% of the inventory using long term financing, and the other 20% using short term financing. Plan B would finance $35,000 of the inventory using long term financing, and the remainder using short term financing. Annual interest rates are currently 5% for short term financing, and 8% for long term financing. Compute the interest expense cost of both plans. Provide a brief comment on which plan is more aggressive. (6 marks)

Answer rating: 100% (QA)

Interest Expense Cost of Each Plan Plan A Longterm financing 100000 80 80000 Sho... View the full answer