2. The Kedzie Cordage Company needs to finance a seasonal bulge in inventories of $400,000. The funds are needed for six months. The company is considering the following possibilities: a) A terminal warehouse receipt loan is obtained from a finance company. Terms are 12 percent annualized with an 80 percent advance against the value of the inventory. The warehouse costs are $7,000 for the six-month period. The residual financing requirement ($80,000) which is $400,000 less the amount advanced will need to be financed by forgoing some cash discount on its payables. Standard terms are " 2/10, net 30 ", however, the company feels that it can postpone payment until the 40th day without adverse effect. b) A floating lien arrangement is obtained from the supplier of the inventory at an effective interest rate of 20 percent. The supplier will advance the full value of the inventory. c) A field warehouse loan is obtained from another finance company at an interest rate of 10 percent annualized. The advance is 70percent, and field warehousing cost amount to $10,000 for the six-month period. The residual financing requirement will need to be financed by forgoing cash discounts on payables as in the first alternative. What is the least costly method of financing the inventory needs of the firm? (Tip: Compare the total six-month financing costs under each alternative)