Fundamentals of Corporate Finance
Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 20.A, Problem 4QP

(a)

Summary Introduction

To evaluate:The credit analysis of the firm

Introduction:

Credit analysis estimates the credit worthiness to determine the individual customers who will repay and who will not repay.

(b)

Summary Introduction

To evaluate:The break-even credit price

Introduction:

Credit analysis estimates the credit worthiness to determine the individual customers who will repay and who will not repay.

(c)

Summary Introduction

To evaluate:Thecredit analysis of the firm

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on a a discount basis. Problem 7 COST OF TRADE CREDIT AND BANK LOAN Lamar Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 60, and it currently pays after 5 days and takes discounts. Lamar plans to expand. which will require additional financing. a) If Lamar decides to forgo discounts how much additional credit could it get and what would be the nominal and effective cost of that credit? P) J the company could get the funds from a bank at a rate of 10%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? (C) Should Lamar use bank debt or additional trade credit? Explain. Page 121 of 161
How much is the effective cost if you need to borrow $250,000 for one year with 12% single payment interest? * 17.65% 12% 8.7% 20.28% 2.04% How much would be the principal amount of loan if you need to borrow $300,000 for one year with a discount loan of 8%? * 411764.7 3750000 326086.96 24000 375000 How much would be the loan discount if you need to borrow $300,000 for one year with a discount loan of 8%? * 111764.7 26086.96 276000 75000 3450000 ОО
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Fundamentals of Corporate Finance

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