BRCC is evaluating an option for funding its working capital during the next year. The company plans to issue 180-day commercial paper which has an annual interest rate of 8.8% and requires BRCC to pay a transaction fee equal to 0.25%. If BRCC actually needs $225,000 to finance working capital during the next year, how much must BRCC borrow so that it has $

BRCC is evaluating an option for funding its working capital during the next year. The company plans to issue 180-day commercial paper which has an annual interest rate of 8.8% and requires BRCC to pay a transaction fee equal to 0.25%. If BRCC actually needs $225,000 to finance working capital during the next year, how much must BRCC borrow so that it has $

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 24P

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If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, how much will be accounted for as a current portion of a noncurrent note payable each year?
Paymaster Enterprises has arranged to finance its seasonal working capital needs with a short term bank loan. The loan will carry a rate of 0.072 per anum paid in advance (discounted). If Paymaster plans to borrow $760000 for a period of 7 months, what is the cost of the loan.
The Odessa Supply Company is considering obtaining a loan from a sales finance company secured by inventories under a field warehousing arrangement. Odessa would be permitted to borrow up to $350,000 under such an arrangement at an annual interest rate of 10 percent. The additional cost of maintaining a field warehouse is $17,000 per year. Assume that there are 365 days per year. Determine the annual financing cost of a loan under this arrangement if Odessa borrows the following amounts: $350,000. Round your answer to two decimal places. % $320,000. Round your answer to two decimal places. %
BRCC is evaluating two options for funding its working capital during the next year. Option one is borroeing from the bank using a 180-day discount interest loan which has a quoted interest rate equal to 7.8% and requires a 20% compensating balance. BRCC normally maintains an average checking account balance of $5,000. Option two is to issue 180-day commercial paper which has an anual interst rate equal to 8.8% and requires BRCC to pay a transaction fee equal to 0.25%. (a) If BRCC actually needs $225,000 to finance working capital durng the next year, how much must BRCC borrow with each option so that $225,000 can be used to pay bills? (b) which option is better?
The Xeor supply company needs to increase its working capital Tk. 5.4 million. The following three financing alternatives are available (assume a 365 day year).i) Forgo cash discount (granted on a basis of 5/10, net 30) and pay on the final due date.ii) Borrow Tk. 6 million from a bank at 15 percent interest. This alternative would necessitate maintaining a 12 percent compensating balance.iii) Issue Tk. 5.7 million of six-month commercial paper to net Tk. 5.4 million. 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.) Requirement: Assuming that the firm would prefer the flexibility of bank financing, provided theadditional cost of this flexibility was no more than 3 percent per annum, whichalternative should Xeor select? Why?
Ranger Enterprises is considering pledging its receivables to finance a needed increase in working capital. Its commercial bank will lend 65 percent of the pledged receivables at 1.5 percentage points above the prime rate, which is currently 9 percent. In addition, the bank charges a service fee equal to 2 percent of the pledged receivables. Both interest and the service fee are payable at the end of the borrowing period. Ranger’s average collection period is 50 days, and it has receivables totaling $6 million that the bank has indicated are acceptable as collateral. Calculate the annual financing cost for the pledged receivables. Assume that there are 365 days per year. Round your answer to two decimal places. %
ABC would like to hire two loan collectors to speed up its collection process. Each of the loan collectors will be given total annual benefits of P150000 per year. The entity earns P30000000 in sales, 10% of which are cash. The entity has a 365-day per year and a minimum required rate of return of 10%. the current average age of receivables is 70 days but with the loan collectors, it is forecasted to decrease to 30 days. How much is the net benefit or cost of this option?
Singapore Post has approached a bank to take out a mortgage loan purchase a new warehouse. The bank is willing to provide them with a 10-year loan of $400,000 at an interest rate of 12% per annum, compounding monthly. Singapore Post will be required to make monthly repayments on the loan. Calculate the monthly loan instalment that will be paid on the loan. Assume that Singapore Post instead negotiates to make annual repayments on the loan. What is the annual effective interest rate on the current loan terms? Singapore Airlines has 8% $100,000 debentures outstanding in the corporate bond market, with exactly 8 years left until maturity. The bonds pays coupon half yearly. Calculate the price of the corporate bond to yield an investor 6% per annum, compounding half yearly.
Lang Industrial Systems Inc. is thinking of expanding its operations and is considering financing the expansion by borrowing from a local bank. Under consideration is a loan for $1.25 million dollars, repayment monthly for 30 years. Required: a) b) If the interest rate on the loan is 6%, calculate the monthly repayment. Prepare an amortization schedule for the first two (2) months of the loan.
Titusville Petroleum Company is considering pledging its receivables to finance an increase in working capital. Citizens National Bank will lend the company 90 percent of the pledged receivables at 3 percentage points above the prime rate (currently 8%). The bank charges a service fee equal to 1.3 percent of the pledged receivables. The interest costs and the service fee are payable at the end of the borrowing period. Titusville has $2 million in receivables that can be pledged as collateral. The average collection period is 55 days. Assume that there are 365 days per year. Determine the annual financing cost to Titusville of this receivables-backed loan. Round your answer to two decimal places. %
Starr Co, has been approved for a $ 100,000 loan commitment from its local bank. The bank has offered the following term =one year, up front fee =75 basis point, back end fee =25 basis points , and rate on the loan =8.00 percent. Starr expects to immediately take down $80,000 and no more during the year unless there is some unforeseen need. What is the total interest and fees Starr can expect to pay this loan commitment?
The financial managers at Henderson Corporation are arranging the financing for working capital requirements for the upcoming year. Henderson's local bank offers a discount interest loan at a quoted (simple) interest rate of 12.00%. With a discount interest loan, interest is payable up front, and the actual amount received is less than the face amount of the loan. Suppose Henderson applies for a $300,000 loan with a nine-month term. Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of this loan. Interest payment Amount of cash received Annual percentage rate (APR) Effective annual rate (EAR) What is the nine-month rate if the bank charges a $100 processing fee? O 9.93% O 9.03% O 8.94% Value O 13.19%