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1. Interest costs under alternative plans (LO3) Carmen's Beauty Salon has estimated monthly financing requirements for the next six months as follows: Short-term financing will be utilized for the next six months. Projected annual interest rates: a. Compute total dollar interest payments for the six months. To convert an annual rate to a monthly rate, divide by 12 . Then, multiply this value times the monthly balance. To get your answer, add up the monthly interest payments. b. If long-term financing at 12 percent had been utilized throughout the six months, would the total-dollar interest payments be larger or smaller? Compute the interest owed over the six months and compare your answer to that in part a. 2. Break-even point in interest rates (LO3) In Problem 18 , what long-term interest rate would represent a break-even point between using short-term financing as described in part a and long-term financing? (Hint: Divide the interest payments in 18a by the amount of total funds provided for the six months and multiply by 12.) 1. Interest costs under alternative plans (LO3) Carmen's Beauty Salon has estimated monthly financing requirements for the next six months as follows: Short-term financing will be utilized for the next six months. Projected annual interest rates: a. Compute total dollar interest payments for the six months. To convert an annual rate to a monthly rate, divide by 12 . Then, multiply this value times the monthly balance. To get your answer, add up the monthly interest payments. b. If long-term financing at 12 percent had been utilized throughout the six months, would the total-dollar interest payments be larger or smaller? Compute the interest owed over the six months and compare your answer to that in part a. 2. Break-even point in interest rates (LO3) In Problem 18 , what long-term interest rate would represent a break-even point between using short-term financing as described in part a and long-term financing? (Hint: Divide the interest payments in 18a by the amount of total funds provided for the six months and multiply by 12.)

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