Question 2 Evo Berhad needs RM200,000 for 9 months additional short-term financing. The management has identified three (3) suitable financings for the project as follows: Alternative 1 Issue commercial paper at 9% annual interest rate with floatation cost of RM3,000 per paper. The face value of each paper is RM50,000. Alternative 2 A discounted loan at an interest rate of 7% and compensating balance of 5%. Alternative 3 A revolving credit agreement amounting RM350,000. The commitment fee is 3%. The annual interest rate on the loan is 6%. ! i. Calculate every alternative. ii. Which alternative is the best and justify your answer

Question 2 Evo Berhad needs RM200,000 for 9 months additional short-term financing. The management has identified three (3) suitable financings for the project as follows: Alternative 1 Issue commercial paper at 9% annual interest rate with floatation cost of RM3,000 per paper. The face value of each paper is RM50,000. Alternative 2 A discounted loan at an interest rate of 7% and compensating balance of 5%. Alternative 3 A revolving credit agreement amounting RM350,000. The commitment fee is 3%. The annual interest rate on the loan is 6%. ! i. Calculate every alternative. ii. Which alternative is the best and justify your answer

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 28P

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Problem D: Effective cost of Short‐term Loan:ABC would need cash of P5,000,000. Several banks offered different loan conditions. One of the loans has a term of 6 months,interest of 5%, and compensating balance of P50,000Required:11. How much should the face value of the loan be?12. How much is the simple effective annual interest?
1. AXN Sdn Bhd needs to raise RM1, 000,000 in short-term loan for five months. loan from OCBC bank at discounted interest rate of 12% per annum and a 20% compensating balance. The present account balance in the company is RM 100,000. Compute the effective cost of financing.
Problem D: Effective cost of Short‐term Loan:ABC would need cash of P5,000,000. Several banks offered different loan conditions. One of the loans has a term of 6 months,interest of 5%, and compensating balance of P50,000Required:1. How much should the face value of the loan be?2. How much is the simple effective annual interest?Problem E: Effective cost of Short‐term Loan: ABC will be acquiring a P4,000,000 loan from XYZ Bank. 13. The detail are 6‐month term, 3% interest, P40,000 bank chargeand P50,000 compensating balance.Required:1. How much is the compound effective annual interest?
Bank M offers the following terms for a $10 million loan: interest rate: 8 percent for one year on funds borrowed fees: 0.5 percent of the unused balance for the unused term of the loan Bank N offers the following terms FOR A $10 million loan interest rate 6.6 percent for one year on fund borrowed fees: 2 percent origination fee a. Which terms are better if the firm intends to borrow the $10 million for the entire year? b. If the firm plans to use the funds for only three months, which terms are better?
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A6) Finance Find the annual financing cost of a 45 day revolving credit agreement with a 0.5% commitment fee. Assume you borrow $278,558m at 5.62%. You can borrow up to $500,000.
A construction company plans to accelerate the payments on an equipment loan as production increases. The initial payment is $10,000 per year and the plan is to increase the payment, beginning in year 2, by an additional $1,000 each year through year 10. Determine the equivalent annual payment if the loan interest rate is 12%. Select one: O a. $13,585 Ob. $12,650 Oc. $18,650 O d. $15,485 Next page GRO3-07.06.2021 Time:14.30 Jump to... u Rabiu (Log out) N 204 14:43 AK A O 4x O ENG 24/06/2021
Miracle Bhd requires RM500,000 ti finance its operations. The following short-termresources of financing are available: Alternative I A loan from OCS Bank with simple interest rate of 9 percent per annum for 3 months. A 20 percent compensating balance is required. Alternative II Issue commercial papers at a face value of RM5,000 per paper. The interest is 8 percent per annum for 270 days maturity period. The issuing cost is RM150 per paper. Alternative III A revolving line of credit of RM550,000 for a 1 percent commitment fee on the unused funds and an 8 percent interest rate. i) Calculate the effective interest rate for each alternative. ii) Justify the best alternative for Miracle Bhd.
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