Question: Task: 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