Final answer:
Macco Bakers has three alternatives to obtain $500,000 in financing for a 90-day period. These alternatives include establishing a line of credit with the bank, forgoing trade discounts from suppliers, or issuing commercial paper. Each alternative has its own costs and implications for the company.
Step-by-step explanation:
Macco Bakers has three alternatives to obtain $500,000 in financing for a 90-day period:
a. Establish a line of credit with the bank at an interest rate of 8 percent, which will require a fee of $5,000 to be paid upfront.
b. Forgo trade discounts from suppliers on terms of 2/10, net 100. This means the company would not take advantage of a 2% discount if payment is made within 10 days, but instead, pay the full amount within 100 days.
c. Issue commercial paper for 90 days at a discount of 2.05 percent. This means the company would borrow funds by issuing short-term debt at a discount to the face value, with repayment due in 90 days.
Each alternative has different costs and implications for Macco Bakers, and the company would need to evaluate them based on their financial needs, cash flow situation, and preferences.