Detailed Answer
Answer (B) is correct. The total cost to the company will be $21,200 ($20,000 discount + $1,200 transaction cost), and the net amount available will be $978,800. The annualized amount of the costs is $84,800 (4 × $21,200). Accordingly, the annual interest cost will be 8.66% ($84,800 ÷ $978,800).