The Phulchoki Supply Company needs to increase its working capital by Rs. 4,400,000. The following financing alternatives are available (assume a…

The Phulchoki Supply Company needs to increase its working capital by Rs. 4,400,000. The following financing alternatives are available (assume a 365-day year): 

1. Forgo cash discounts (granted on a basis of "3/10, net 30") and pay on the final due date. 
2.  Borrow Rs. 5,000,000 from a bank at 15 percent interest. This alternative would necessitate maintaining a 12 percent compensating balance. 
3. . Issue Rs. 4,700,000 six-month commercial paper to net Rs. 4,400,000. Assume that new paper would be issued every six months. (Note: Commercial paper has no stipulated interest rate. It is sold at a discount, and the amount of the discount determines the interest cost to the issuer)a. Which alternative should Phulchoki Supply company select? 

b. Assuming that the firm would prefer the flexibility of bank financing, provided the additional cost of this flexibility was... 

c. Is the source with the lowest expected cost necessarily the source to select? Why or why not?