ABC Company, domiciled in a country with a strong legal system, is applying for a USD 100,000 loan with an annual interest rate of 5% to be used exclusively on expanding its business and not to repay current debt. The loan will be secured by the company’s factory buildings, which have an appraised value of USD 200,000. The company has an annual operating profit of USD 3,000. Which of the following statements relating to the credit risk of this company can most likely be inferred from the given data?
AThe company’s capacity to pay is low.
BThe company’s willingness to pay is low.
CThe loan exhibits a high loss given default.
DThe loan’s exposure at default will increase.
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