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P10-3 Cayman Diving, Inc., needs to acquire a newdive boat. The seller will accept a...

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Accounting

P10-3 Cayman Diving, Inc., needs to acquire a newdive boat. The seller will accept a noninterest-bearing note for $400,000 due in four years or $250,000 in cash. The companysincremental cost of borrowing is 10%.Required:Which option should Cayman Diving select? Would your answer change if Caymans incre-mental borrowingrate was 13%? Why?

Consider P10-3 Determining Asset Cost when purchasing with a note on page 586. Which option should Cayman Diving select? Would your answer change if Caymans incremental borrowing rate was 13%? Why?

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