You are a consultart for Mantred Systems incorporated, which manufactures equipment for smag peint shops. The eFo recenty met to discuss refleureitig leng. terin debt that is due and wanted to review possible options for Manfred Systems, the long term debt ini question is 510 million, which was usent in starchine procu.5s Hinanciog details Debt to relinance =$10.000.000 Option 1. Recborrow the money from the Business Development Bank of Canikia on a fiveyear basis with a flot tate of Bsi the loan balunce would be dibe in five . years, but the company must make anmual interest payments to the bank. Option 2. Borrow the money from RBC bank Using short term one-year loans; the first year would be at an interest rate of 6 s. per aninum. II the concipary matidain a compensating balance of 10% of the loan, the interest rate will get lowered to 5.55 per anriuin frectuced by 0.54 The CFO is inserestend in the potential advantages of shortserm borrowing to save on interest costc. Required: a. How much would the company need to bortow to acquite the funds required at 5.59 ? Note: The company would also need to bourvw to cover the compensating balance requarenent. 22 marks\} b Compare the cost of the one year short-term loan if the company deciles to borrow the funds at 6% or wants to borrow and leverage mier rate of 5.52 if the compensating balance is covered. Which is less expensive? (5 marks) c. Compare the total costs of the long-term loan from the Business Development Bank of Canada with the shorteterm tirsancing optson if the following cates aie aviliable: Year 1: 6% Year 2: 8%. Year a: 9% Year-4: 900 . Year 5 : 4 : Disregard the compensating bolance requivement tor this question. Which altemative woild be best for the coenpary? (6 murks? d. What are the advaritages and disadvantages of shoet terri vs longterri financing? Aue acy other alereatives avaltable to the company? if yrie were the ofo of "Show all calculations - Please submit the coleulations to all questions en Moodle": You are a consultant for Manfred Systems Incorporated, which manufactures equipment for small print shops. The CFO recently met to discuss refinancing long-term debt that is due and wanted to review possible options for Manfred Systems. The long-term debt in question is $10 million, which was used to purchase additional manufacturing equipment to meet consumer demand and streamline production, increasing efficiency and removing bottlenecks in the production process. Financing details: Debt to refinance =$10,000,000 Option 1: Reborrow the money from the Business Development Bank of Canada on a five-year basis with a flat rate of 8%. 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 first year would be at an interest rate of 6% per annum. If the company maintains a compensating balance of 10% of the loan, the interest rate will get lowered to 5.5% per annum (reduced by 0.5% ). Option 2: Borrow the money from RBC bank using short-term one-year loans; the first year would be at an interest rate of 6% per annum. If the company maintains a compensating balance of 10% of the loan, the interest rate will get lowered to 5.5% per annum (reduced by 0.5% ). The CFO is interested in the potential advantages of short-term borrowing to save on interest costs. Required: a. How much would the company need to borrow to acquire the funds required at 5.5% ? Note: The company would also need to borrow to cover the compensating balance requirement. ( 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 borrow and leverage the rate of 5.5% if the compensating balance is covered. Which is less expensive? ( 5 marks) c. Compare the total costs of the long-term loan from the Business Development Bank of Canada with the short-term financing option if the following rates are available: Year 1:6\% Disregard 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 short-term vs longterm financing? Are any other alternatives available to the company? If you were the CFO of the company, would you adopt a higher risk/reward financing policy or a more conservative financing policy? Explain in detail (at least 300 words)