Cheapest source of financing for hand-to-mouth

Assignment Help Financial Management

Reference no: EM131490158

Your startup needs a $10,000 loan for the next 35 days. It is trying to decide which of three alternatives to use:

Alternative A: Forgo the discount on its trade credit agreement that offers terms of 2.0 /10, net 35.

Alternative B: Borrow the money from Bank A, which has offered to lend the firm $10,000 for 35 days at an APR of 12%. The bank will require a (no-interest) compensating balance of 5% of the face value of the loan and will charge a $100 loan origination fee, which means your start-up must borrow even more than the $10,000.

Alternative C: Borrow the money from Bank B, which has offered to lend the firm $10,000 for 35 days at an APR of 14%. The loan has a 1% loan origination fee.

For alternative A, the annual rate is %. (round to two decimals)

For alternative B, the annual rate is %. (round to two decimals)

For alternative C, the annual rate is %. (round to two decimals)

Which alternative is the cheapest source of financing for Hand-to-Mouth?

It is alternative . (fill in "A", "B", or "C" without quotes)

Reference no: EM131490158

Questions Cloud

CAPM is valid is the following situation possible : If CAPM is valid, is the following situation possible?

What should the rate of return on its stock been this month : The monthly rate of return on T-bills is 0.1%. what should the rate of return on its stock been this month?

What are its expected growth rate : What are its expected (or sustainable) growth rate, its price, and its P/E ratio?

Write methodology for this topic portfolio selection : Discuss what is covered in a disciplinary defense insurance policy Write a methodology for this topic " portfolio selection".

Cheapest source of financing for hand-to-mouth : Which alternative is the cheapest source of financing for Hand-to-Mouth?

What is the risk premium on a portfolio invested : What is the risk premium on a portfolio invested 40% in GM and 60% in Ford, if they have betas of 1.4 and 1.0 respectively?

Loan origination fee and compensating balance requirement : Which total amount you must borrow to cover both the loan origination fee and the compensating balance requirement?

Standard deviation of the rate of return on investment : What is the standard deviation of the rate of return on this investment?

Standard deviation of return on the individuals portfolio : What is the expected rate of return and standard deviation of return on the individual's portfolio?

User Account

All Pages