QUESTION 15 You plan to borrow $150,000 from the bank to pay for inventories for your small business. The bank offers to lend you the money at 6 percent annual interest for the 4 months the funds will be needed. In addition, the bank requires you to maintain a compensating balance of 6% of the loan amount that will come out of the loan. Calculate the effective cost of the credit if the interest is discounted. 6.52% 5.42% O 8.76% 9.89% 7.64% QUESTION 2 A company is considering two equally risky, mutually exclusive projects A and B. The cost of capital is 9%. The CEO wants to use the IRR criterion, while the CFO favors the NPV method. If the CEO's preferred criterion is used, how much value will the firm lose as a result of this decision? Year Project A Project B 0 -$4,000 -$2,000 1 2,000 1,000 2 2,100 1,100 3 2,200 1,200 4 2,300 1,300 0 1102.45 1169.87 1239.72 1037.35 0 1312.13