1.Dash construction needs to borrow $200,000 for 45 days in order to take advantage of the cash discount of 3/10, n55 offered by a supplier. Dash Construction can borrow the funds from a bank with an interest payment of $5,000 at the maturity of the loan. Should management borrow the funds from the bank to take advantage of the discount?

2.A commercial bank offers you a $200,000 annual line of credit with the following terms:

Origination fee: $2,000 paid when the line is accepted.

Fees: 1 percent on unused balance, paid at the end of the year.

Interest rate: 9 percent

What is the effective cost of the loan

a. if you expect to borrow the entire $200,000 for the year?

b. if you expect to borrow the $200,000 for only three months?