The Macrohard Corporation projects an increase in sales from $18 million to $25 million, but it needs an additional $500,000 of current assets to support this expansion. Macrohard purchases under terms of 2/10, net 45 and currently pays on the 10th day, taking discounts. The CFO is considering using trade credit to finance the additional working capital required. Alternatively, Macrohard can finance its expansion with a one-year loan from its bank. The bank has quoted the following alternative loan terms:

a) 10 percent rate on a simple interest loan, with monthly interest payments.

b) 9 percent annual rate on a discount interest basis with no compensating balance.

c) 8 percent annual rate on a discount interest basis, with a 10 percent compensating balance.

d) 7 percent add-on interest, with monthly payments.