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You are a coesultant for Manfred Systems incorporated, which manufactures equipment for smali print shops. The CFO recently met to discuss refinancing long-term debt that

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You are a coesultant for Manfred Systems incorporated, which manufactures equipment for smali print shops. The CFO recently met to discuss refinancing long-term debt that is due and wanted to review possible options for Mantred Systems. The long-term debt in question is $10 million, which was used to puichase additional manifacturing equipanent to meet consumer demand and streamine production, increasing efficiency and rentioving bottlenecks in the production process. Floancing decalls: Debt to refinance =$10,000,000 Option 1: Reborrow the money from the Business Development.Bark. of Canada on a five-year basis with a flat rate of 8 ig. The loan balance would be due in five years, but the company must make annual interest payments to the bank. Option 2. Borrow the money from RBC bank using short-term one year loans, the fist year would be at an interest fate of 6 s pet anrain, if the company maintains a compensuting batance of tok of the loan, the interest rate will get lowered to 5.5% per annum (ueduced by 0.5 ) The CFO is interested in the potential odvantages of short term borrowing to sive on interest costs. Required: a. How much would the company need to bortow fo accualie the funds requined at 5.5% ? Note: The compary would also need to borrow to coyer the compensating baance reguliement. (2 marks) b. Compare the cost of the one-year short-term loan if the company decides to borrow the funds at 6% or wants to bonrew and leyerage the rate of 5.5% if the compensating balance is covered: Whichtis less expensive? 5 marks) C. Compare the total costs of the Jong term loan from the Blusiness Development Bank of Canada with the short term financing option if the following rates are available Year 1:6\% Bisregard the compensating balance requirement for this question. Which alternative would be best for the company? (6 marks) d. What are the advantages and disadvantages of shorttern vs long term financing? Are any other alternatives available to the company? If you were the CFO of the compary, would you adopt a higher risk/reward financing policy of a more conservative financing policy? Explain in detaif lat least 300 woedsis ( (3 matks) Show all colculotions - Please submit the colculations to all questions on Moodle

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