Manufacturing faces a liquidity crisis %u2013 it needs a loan of $100,000 for 1 month. having no source of additional unsecured borrowing, the firm must find a secured short-term lender. the firm%u2019s accounts receivable are quite low, but its inventory is considered liquid and reasonable good collateral.

the book value of the inventory is $300,000, of which $120,000 is finished goods. (assume a 365-day year.)*city-wide bank will make a $100,000 trust receipt loan against the finished goods inventory. the annual interest rate on the loan is 12% on the outstanding loan balance plus a 0.25% administrative fee levied against the $100,000 initial loan amount. because is will be liquidated as inventory is sold, the average amount owed over the month is expected to be $75,000.
*sun state bank will lend $100,000 against a floating lien on the book value of inventory for the 1-month period at an annual interest rate of 13%
*citizens%u2019 bank and trust will lend $100,000 against a warehouse receipt on the finished goods inventory and charge 15% annual interest on the outstanding loan balance.
a 0.5% warehousing fee will be leived against the average amount borrowed. because the loan will be liquidated as inventory is sold, the average loan balance is expected to be $60,000.

1) calculate the dollar cost of each of the proposed plans for obtaining an initial loan amount of $100,000.
2)which plan do you recommend? why?
3)if the firm had made a purchase of $100,000 for which it had been given terms of 2/10 net 30, would it increase the firm%u2019s profitability to give up the discount and not borrow as recommended in part b? why or why not?