Western Wholesalers is evaluating the following three independent short - term financing arrangements . What is the effective annual cost %) for each financing alternative ? a . A 30 day loan secured against receivables from Pacific Financing Co. with the following terms : ( 3 marks) Receivables value is $2,500,000 The financing company will lend up to 80% of the receivables value 0.25 % processing fee ( every 30 days) based on the total receivables value Loan rate is 7.5% annually .

A 90 day inventory loan from Commercial Bank of Ontario with the following terms: (3marks) Inventory value is $ 2, 666, 667 Loan will be 75% of collateral value Prime rate is 4 % annually Field warehouse loan fee of $ 60 per day Loan rate is 2% over prime