A small bookcase manufacturer has tasked you with making a financing strategy for them. After reviewing their books and documents you found the following three financing opportunities in their documents:

10% 20 year bank loan from Bank A 15% 1 year renewable loan from Bank B 8% line of credit from bank A. Currently the company is financed by the loan from Bank B, they feel though that the cost is too high and therefore want to replace the loan with another loan or loans. After going through the books you estimate that 80% of current assets are permanent and the remainder fluctuating.

The company is taxed at 28%. Required: 1. Which type of financing strategy is the company currently using? 2. What financing strategy options are available to the company? 3. If the company chooses to match financing terms and needs, which financing strategy would you recommend? 4. What would the cost of financing be under each of the financing strategies you have identified? 5. Which strategy would you recommend, not taking risk into consideration?