P18-9 (similar to) Question Hold (Related to Checkpoint 18.2) (Calculating the cost of short-term financing) The R Morin Construction Company needs to borrow $110.000 to help finance the cost of a new $105.000 hydrae crary owed in the firm's commercial construction business. The crane will pay for itself in one year and the firm is considering the following alomatives for financing its purchase Alternative. The fir's bank has agreed to lend the $110.000 at a rate of 14 percent. Interest would be discounted, and a 16 porcent compensating balance would be required. However, the compensating balance requirement is not binding on the firm because it normally maintains a minimum demand deposit(checking account balance of $27.500 in the bank. Alternative The equipment dealer has agreed to finance the equipment with a 1-year loan. The $110,000 loan requires payment of principal and interest totaling $127 457 a. Which allative should Morin select? if the bank's compensating balance requirement had necessitated idle demand deposits equal to 16 percent of the loan, what effect would this have had on the cost of the bank loan alternative? a. The cost of Anomativo A would be 1%. (Round to two decimal places)