The Smith Corporation is a maker of fine stereo components and presently has finished goods inventories of $800,000. They need a short-term bank loan of $400,000 for three months. The bank has proposed two different financing arrangements. The first is a floating lien arrangement at a rate of 22 percent. The second proposal is for a terminal warehouse arrangement at 11 percent. Under the latter proposal, Smith will pay $1,000 a month plus round trip shipping expense of $6,000. Which source of credit should be selected by the Smith Corporation? Explain.