3 s Fact Pattern: The Frame Supply Company has just acquired a large account and needs to increase its working capital by $100,000. The controller of the company has identified the four sources of funds given below. 1. Pay a factor to buy the company's receivables, which average $125,000 per month and have an average collection period of 30 days. The factor will advance up to 80% of the face value of receivables at 10% and charge a fee of 2% on all receivables purchased. The controller estimates that the firm would save $24,000 in collection expenses over the year. Assume the fee and interest are not deductible in advance. 2. Borrow $110,000 from a bank at 12% interest. A 9% compensating balance would be required. 3. Issue $110,000 of 6-month commercial paper to net $100,000. (New paper would be issued every 6 months.) 4. Borrow $125,000 from a bank on a discount basis at 20%. No compensating balance would be required. Assume a 360-day year in all of your calculations. The cost of Alternative 3 to Frame Supply Company is Basic Calculator Time Value Tables 10 12 13 14 A. 10.0% 15 16 B. 20.0% 17 C. 18.2% 19 20 D. 9.1%