Inventory financing- Raymond Manufacturing faces a liquidity crisisit needs a loan of$145,000 for 1 month. Having no source of additional unsecured borrowing, the firm must find a secured short-term lender. The firm's accounts receivable are quite low, but its inventory is considered liquid and reasonably good collateral. The book value of the inventory is $435,000, of which $174,000 is finished goods.(Note: Assume a 365-day year.)

1) City-Wide Bank will make a $145,000 trust receipt loan against the finished goods inventory. The annual interest rate on the loan is 11.8% on the outstanding loan balance plus a 0.22% administration fee levied against the $145,000 initial loan amount. Because it will be liquidated as inventory is sold, the average amount owed over the month is expected to be $102,876.

(2) Sun State Bank will lend $145,000 against a floating lien on the book value of inventory for the 1-month period at an annual interest rate of 12.6%.

(3) Citizens' Bank and Trust will lend $145,000 against a warehouse receipt on the finished goods inventory and charge 15.4% annual interest on the outstanding loan balance. A 0.53% warehousing fee will be levied against the average amount borrowed. Because the loan will be liquidated as inventory is sold, the average loan balance is expected to be $87,000.