Cheapest source of financing for handtomouth

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Reference no: EM131619320

Your startup needs a $10,000 loan for the next 30 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 0.5 /10, net 30.

Alternative B: Borrow the money from Bank A, which has offered to lend the firm $10,000 for 30 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 startup 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 30 days at an APR of 11%. The loan has a 1% loan origination fee.

For alternative A, the annual rate is 9.58%. (round to two decimals)

For alternative B, the annual rate is 23.73 (28.21)%. (round to two decimals)

For alternative C, the annual rate is 41.64(26.12)%. (round to two decimals)

Which alternative is the cheapest source of financing for HandtoMouth? It is alternative A . (fill in "A", "B", or "C" without quotes)

Reference no: EM131619320

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