Bernie’s Macs requires $600,000 in financing for a 60-day period. Three alternatives are being considered. a. Establish a line of credit with the bank at an interest rate of 7 percent. The bank will require an annual commitment fee of $4,750 to establish the line of credit. b. Forgo trade discounts from suppliers on terms of 2/30, net 90. c. Issue commercial paper for 60 days at a discount of 1.91 percent. a. What would be the rate of interest for bank loan? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Rate of Interest for bank loan 1% b. What would be the cost of forgoing the cash discount? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Cost of forgoing the cash discount 1% c. What would be the price of commercial paper? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Discounted commercial paper % d. Which alternative should be selected? Bank loan Cost of forgoing discount Commerical paper
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