Reference no: EM132524303

Your company is experiencing extreme short term financial needs due to the Covid-19 lockdown. You need £4,290,000 to cover rent, utilities and salary of key employees that have been retained during the 4 months you expect to be affected by the lockdown. After making some phone calls, you've been able to get the following offers as sources of funding:

• Bank X is offering £4,290,000 for four months at a stated annual rate of 1.85%, using inventory stored in a field warehouse as collateral. The warehouse charges a £20,000 fee, payable at the end of the four months.
• Bank Y can facilitate borrowing up to £1,000,000 for four months at an APR of 3.2%.
• Bank Z offers £4,500,000 for four months at an APR of 1.85. The bank will require to maintain a (no-interest) compensating balance of 10% of the face-value of the loan and will charge a 0.05% loan origination fee.

What would be the best financial strategy that would tide you over the following 4 months? Explain your proposal and show all your calculations.