Part 1-8

Inventory financing Raymond Manufacturing faces a liquidity crisis - it needs a loan of $145,000 for 1 month. Having no source of additional unsecured borrowing, the firm must find a secured source of shortterm lending. The firm's accounts receivable are quite low, but its inventory is considered liquid and reasonably good collateral The book value of Raymond's 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 inventory of finished goods. The annual interest rate on the loan is 11.7% on the outstanding loan balance plus a 0.14% administration fee levied against the $145,000 initial loan amount. Because the loan will be repaid as inventory is sold, the average loan amount owed over the month is expected to be $102,150. (2) Sun State Bank will lend $145,000 against a fioating Sen on the book value of inventory for the 1-month period at an annual interest rate of 12.7%. (3) Citizens' Bank and Trust will lend $145,000 against a warehouse receipt on the finished goods inventory and charge 14.9% annual interest on the outstanding loan balance A .61% Warehousing fee will be levied against the average amount borrowed. Because the loan will be repaid as inventory is sold, the average loan balance is expected to be $87,000. a. The dollar cost of the trust receipt loan is \$ (Round to the nearest cent)