Spoiled Baby Corp sells kid buggies and has decided to expand its operations. It requires borrowing $500,000 for 18 months and has sent you to talk with the bank.
The bank is more than willing to lend the money to company and is providing the company a discounted note at 6 percent. Mr. Moneybags, the banker, has shows that this is quite a deal and non-discounted notes are presently being charged 6.2% APR
As the company accountant you must give the necessary information to support your recommendation to Board of Directors.