The Poksee Epoxy has a revolving credit agreement with a commercial bank under which the company can borrow up to $2 million at an annual interest rate of 1.5% point above the prime rate, which is currently at 9.5%. Poksee is required to maintain a 15% compensating balance on any funds borrowed under the agreement, and to pay a 0.5% commitment fee on the unused portion of the credit line. Both the commitment fee and the interest expense are due at the end of the year. Poksee has $25,000 in its account at the bank that can be used to meet the compensating balance requirement. What is Poksee's annual financing cost of borrowing $1.2 million? [10 points)