Questions $3-5)$ DEF, Inc., has a seasonal pattern to its business. It borrows under a line of credit from Central Bank at $1\%$ over prime. Its total asset requirements now $($at year end$)$ and estimated requirements for the coming year are in millions$)$:

Now

Q$1$

Q$2$

Q$3$

Q$4$

Total asset requirements

$$3\mathrm{.}0$

$$3\mathrm{.}8$

$$4\mathrm{.}5$

$$2\mathrm{.}6$

$$5\mathrm{.}2$

Assume that these requirements are level throughout the quarter. At present the company has $$3\mathrm{.}0$ million in equity capital plus long$-$term debt plus the permanent component of current liabilities, and this amount will remain constant throughout the year.

The prime rate currently is $3\mathrm{.}25\%,$ and the company expects no change in this rate for the next year. Mendez Metal Specialties is also considering issuing intermediate$-$term debt at an interest rate of $5\mathrm{.}5\%.$ In this regard, three alternative amounts are under consideration: zero, $$0\mathrm{.}5$ million, and $$1$ million. All additional funds requirements will be borrowed under the company's bank line of credit.

What the total borrowing costs for alternative $2$: $($$$0\mathrm{.}5$ million debt, plus line of credit$)?($Assume that there are no changes in current liabilities other than borrowings.$)$