Solid-Arity Corporation is a chain of appliance stores in Chicago. It needs to finance all of its inventories, which average the following during the four quarters of the year:

Solid-Arity currently utilizes a loan from a finance company secured by a floating lien. The interest rate is the prime rate plus 7.5 percent, but no additional expenses are incurred. The Boundary Illinois National Bank of Chicago is bidding for the Solid-Arity business. It has proposed a trust receipt financing arrangement. The interest rate will be 2.5 percent above the prime rate, with servicing costs of $20,000 each quarter. Should the company switch financing arrangements? Why?

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QUARTER Inventory level (in thousands) $1,600 $2,100 S1,500 S3,200