ABC Company is considering to establish a line of credit with a local bank to make up for the cash deficit for the next three months. The company expects a 60% chance for a $264,854 deficit and a 40% chance for no deficit at all. The line of credit charges 0.57% of interest rate per month on the amount borrowed plus a commitment fee of $2,500 for a quarter. It also requires a 6% compensation balance for outstanding loans. The company can reinvest any excess cash at an annual rate of 8%. What will the expected cost of establishing a line of credit be? Round your answer to the nearest dollar. (Hint: Refer to a numerical example in short-term financing choices.) Group of answer choices $5,385 $5,388 $5,394 $5,391 $5,382
ABC Company is considering to establish a line of credit with a local bank to make up for the cash deficit for the next three months. The company expects a 60% chance for a $264,854 deficit and a 40% chance for no deficit at all. The line of credit charges 0.57% of interest rate per month on the amount borrowed plus a commitment fee of $2,500 for a quarter. It also requires a 6% compensation balance for outstanding loans. The company can reinvest any excess cash at an annual rate of 8%. What will the expected cost of establishing a line of credit be? Round your answer to the nearest dollar. (Hint: Refer to a numerical example in short-term financing choices.)
Group of answer choices
$5,385
$5,388
$5,394
$5,391
$5,382
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