The management of ProdPharm.inc has decided to increase the production capacity of its factory by purchasing a new production line. This new acquisition will be financed by bank debt. The company consulted several banks to have the interest rate applied for this type of investment. Bank (A) charges an annual nominal rate of 12%. Bank (B) applies a semi-annually capitalized nominal rate of 11.8%. Bank (C) applies a quarterly capitalized nominal rate of 11.6%. Bank (D) applies a monthly compounded nominal rate of 11.5%. What is the rate monthly headcount best for the business? Show all your interest rate equivalence calculations. Keep 6 digits after the decimal point.

The management of ProdPharm.inc has decided to increase the production capacity of its factory by purchasing a new production line. This new acquisition will be financed by bank debt. The company consulted several banks to have the interest rate applied for this type of investment. Bank (A) charges an annual nominal rate of 12%. Bank (B) applies a semi-annually capitalized nominal rate of 11.8%. Bank (C) applies a quarterly capitalized nominal rate of 11.6%. Bank (D) applies a monthly compounded nominal rate of 11.5%. What is the rate monthly headcount best for the business? Show all your interest rate equivalence calculations. Keep 6 digits after the decimal point.

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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