Illiquid Industries Inc. (III) is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or take out a loan. They owe the supplier $10,000 with terms of 2/10 Net 40, so the supplier will give them a 2% discount if they pay today (when the discount period expires). Alternatively, they can pay the full $10,000 in one month when the invoice is due. III is considering three options:

Which alternative is the cheapest source of financing for Illiquid Industries Inc.?

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Alternative A: Forgo the discount on its trade credit agreement, wait and pay the full $10,000 in one month. Alternative B: Borrow the money needed to pay its supplier today from Bank A, which has offered a one-month loan at an APR of 12%. The bank will require a (no-interest) compensating balance of 5% of the face value of the loan and will charge a $100 loan origination fee. Because III has no cash, it will need to borrow the funds to cover these additional amounts as well. Alternative C: Borrow the money needed to pay its supplier today from Bank B, which has offered a one-month loan at an APR of 15%. The loan has a 1% loan origination fee, which again III will need to borrow to cover.