unused balance. Under both loans, a compensating balance equal to 20% of the amount borrowed would be required. The prime rate is currently 7.0%. Both the line-of-credit agreement and the revolving credit agreement would have borrowing limits of $1,000,000. For purpose of his analysis, Morton estimates that kanton will borrow $600,000 on the average during the year, regardless of which financing strategy and loan arrangement it chooses. a. Determine the total annual cost of each of the three possible financing strategies. b. Assuming that the expects its current assets to total $4.0 million throughout the year, determine the average amount of net working capital under each financing strategy. c. Using the net working capital found in part(b) as a measure of risk, discuss the profitability-risk tradeoff associated with each financing strategy. Which strategy would you recommend to Morton mercado for kanton company? Why? d. Find the effective annual rate under: (1) The line-of-credit agreement. (2) The revolving credit agreement. e. If the firm expects to borrow an average of $600,000, which borrowing arrangement would you recommend to kanton? Explain why. Strategy 2-conservative: The amounts required are $7,000,000 long-term and $0 short-term. The cost of this financing will be $ (Round to the nearest dollar.) Strategy 3-Tradeoff: The amounts required are $1,166,667 short-term and $3,000,000 long-term The cost of this financing will be $ (Round to the nearest dollar.) b. Assuming that the firm expects its current assets to total $4.0 million throughout the year, determine the average amount of net working capital under each financing strategy. The net working capital for strategy 1-aggressive is $ (Round to the nearest dollar.) Enter your answer in the answer box and then click check answer. unused balance. Under both loans, a compensating balance equal to 20% of the amount borrowed would be required. The prime rate is currently 7.0%. Both the line-of-credit agreement and the revolving credit agreement would have borrowing limits of $1,000,000. For purpose of his analysis, Morton estimates that kanton will borrow $600,000 on the average during the year, regardless of which financing strategy and loan arrangement it chooses. a. Determine the total annual cost of each of the three possible financing strategies. b. Assuming that the expects its current assets to total $4.0 million throughout the year, determine the average amount of net working capital under each financing strategy. c. Using the net working capital found in part(b) as a measure of risk, discuss the profitability-risk tradeoff associated with each financing strategy. Which strategy would you recommend to Morton mercado for kanton company? Why? d. Find the effective annual rate under: (1) The line-of-credit agreement. (2) The revolving credit agreement. e. If the firm expects to borrow an average of $600,000, which borrowing arrangement would you recommend to kanton? Explain why. Strategy 2-conservative: The amounts required are $7,000,000 long-term and $0 short-term. The cost of this financing will be $ (Round to the nearest dollar.) Strategy 3-Tradeoff: The amounts required are $1,166,667 short-term and $3,000,000 long-term The cost of this financing will be $ (Round to the nearest dollar.) b. Assuming that the firm expects its current assets to total $4.0 million throughout the year, determine the average amount of net working capital under each financing strategy. The net working capital for strategy 1-aggressive is $ (Round to the nearest dollar.) Enter your answer in the answer box and then click check