Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 55; and it currently pays on the 5^th day and takes discounts. Lancaster plans to expand, which will require additional financing. Assume 365 days in a year for your calculations.

1. If Lancaster decides to forgo discounts, how much additional credit could it obtain? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent. $
2. What would be the nominal cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places.%
3. What would be the effective cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places.%
4. If the company could get the funds from a bank at a rate of 9%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Do not round intermediate calculations. Round your answer to two decimal places. %
5. Should Lancaster use bank debt or additional trade credit? -Select- Bank debt. /. Additional trade credit