Option 1: construct the new equipment in-house and sell the old equipment for cash at a fair value of $60,000. b & e would take out a one-year construction loan for $500,000 at the time construction begins at a short-term borrowing rate of 10% for the construction anticipated actual expenditures for constructing the equipment are $580,000. the bulk of the $580,000 will be financed with the construction loan, and the balance will be financed through accounts payable. the interest on the short-term note is due and payable by year-end. (note: construction is assumed to be completed at december 31,2019.)