FIN 419 rewriting work

Analyze and calculate the following scenarios in 525 words, including which one would you choose and why, and which financing option is best for your business:

In order to calculate the scenarios I have to follow the formulas for each one, and then determine which scenario is the best between the two. So for scenario 1 I would have to take the total amount borrowed ($300,000), and times it by the 8% interest rate. Once I do that I will get the interest amount of $24,000 a year, creating a total amount of $324,000 for the first year getting paid. For the second year I would take the total amount from the year before ($324,000) and times that again by the 8%, which gives me the interest amount of $25,920 and a yearly total of $349,920. For year 3 I would again take the total from the year before and times it by the 8% interest rate, giving me $27,993.60, again giving me a total of $377,913.60. Now I take the $377,913.60 and again times that by the interest rate (8%) which gives me $30,233 and a total for year $408,147. For the last year the $408,147 and multiply that which would give me an interest total of $32,652 and a yearly total of $440,798.42? Now in order to find out how much interest was paid for the whole exchange, I would have to take the interest from each year and add them together, giving me a total of $140,798

For Scenario 2, my calculations will be a little bit different. Because we are paying interest at the rate of 8% per year for 4 years and then a final payment of interest and principal at the end of the 5th year. For this I would have to take the original payment of $300,000 and times it by the 8% interest rate which gives me $24,000 interest every year. Paying only the interest every year, on year 5 we would pay the whole lump sum of the $24,000 yearly interest plus the original $300,000 coming to a total of $324,000 for year 5. Doing this would allow me to only pay a total amount of $420,000 because I would take the total amount from each year and add them together ($24,000x4+$324,000).

After completing the Spreadsheet, I have come to the conclusion that scenario 1 has a total payment of $440,798 and scenario 2 would have a total of $420,000. With this being the conclusion of the two scenarios, it is only right that I would choose Scenario #2 because in the long run I would have to pay less interest, which would result in me paying less money in my total overall amount. It also allows me to pay less money during the first four years allowing me to save money so that I can have enough money for the bigger payment on the last year. Although it is the best choice out of the two, most people or businesses in this situation are scared of the amount paid in the last year causing them to go with scenario one.