Carmen’s Beauty Salon has estimated monthly financing requirements for the next six months as follows: January $ 8,500 April $ 8,500 February 2,500 May 9,500 March 3,500 June 4,500 Short-term financing will be utilized for the next six months. Projected annual interest rates are: January 9.0 % April 16.0 % February 10.0 % May 12.0 % March 13.0 % June 12.0 %
a. Compute total dollar interest payments for the six months
b-1. Compute the total dollar interest payments if long-term financing at 12 percent had been utilized throughout the six months.
b-2. If long-term financing at 12 percent had been utilized throughout the six months, would the total-dollar interest payments be larger or smaller than with the short-term financing plan?