Which alternative is the cheapest source of financing

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Reference no: EM131993748

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 die 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 %. For alternative B, the annual rate is %. For alternate C, the annual rate is %.

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: EM131993748

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