Beckheart is seeking financing for its inventory. Safe-proof Warehouses offers space in their facility for Beckheart’s inventory. They offer loans with a 15-percent APR equal to 60% of the inventory. Monthly fees for the usage of the warehouse are $500 plus 0.5 percent of the inventory’s value. If Beckheart has saleable inventory of $2 million,
a. How much money can the firm borrow?
b. What is the interest cost of the loan in dollars over a year?
c. What is the total amount of fees to be paid in a year?
d. What is the effective annual rate of using Safe-proof to finance Beckheart’s inventory?