13. Vesco-Zultch Corporation is a chain of appliance stores in Chicago. It needs to finance all of its inventories, which average the following during the four quarters of the year (in thousands):

Inventory level / $1,600 $2,100 $1,500 $3,200 Quarters Vesco-Zultch presently utilizes a finance company loan secured by a floating lien. The interest rate is the prime rate plus 7; percent, but no additional expenses are incurred. The Boundary Illinois National Bank of Chicago is bidding for the Vesco-Zultch business. It has proposed a trust receipt financing arrangement. The interest rate will be 2; percent above the prime rate, with servicing costs of $20,000 each quarter. Should the company switch financing arrangements?

1 2 3 4 516 Part V L i q u i d i t y and Working Capital Management