A company is considering an issue of Commercial Paper (CP) to raise $15 million. The issue will mature in 30 days. It will be issued at a discount of 40 basis points. The -0,4% dealer will charge an annualized fee of 10 pasis points and will require a backup letter 0.1% of credit (L/C) to be issued in its favour at a cost of 25 basis points. 0.25%. Required: Assuming a 360-day year, calculate: Par value Dolar discount a) the usable funds that the company will raise upon issue of the CP b) the pro-rated dealer fee c) the pro-rated L/C fee d) the effective annual interest that the company is paying for the credit it raises through the issue of CP -

A company is considering an issue of Commercial Paper (CP) to raise $15 million. The issue will mature in 30 days. It will be issued at a discount of 40 basis points. The -0,4% dealer will charge an annualized fee of 10 pasis points and will require a backup letter 0.1% of credit (L/C) to be issued in its favour at a cost of 25 basis points. 0.25%. Required: Assuming a 360-day year, calculate: Par value Dolar discount a) the usable funds that the company will raise upon issue of the CP b) the pro-rated dealer fee c) the pro-rated L/C fee d) the effective annual interest that the company is paying for the credit it raises through the issue of CP -

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Red Company desires to finance its P300,000 inventory. Funds are required for 4 months. Under consideration is a warehouse receipt loan at an annual interest rate of 17 percent, with an 85 percent advance against the inventory’s value. The warehousing cost is P5,000 for the 4-month period. Determine the financing cost.
ABC Company is considering to establish a line of credit with a local bank to make up for the cash deficit for the next three months. The company expects a 60% chance for a $273,446 deficit and a 40% chance for no deficit at all. The line of credit charges 0.52% of interest rate per month on the amount borrowed plus a commitment fee of $2,500 for a quarter. It also requires a 9% compensation balance for outstanding loans. The company can reinvest any excess cash at an annual rate of 8%. What will the expected cost of establishing a line of credit be? Round your answer to the nearest dollar. (Hint: Refer to a numerical example in short-term financing choices.) Group of answer choices $5,313 $5,321 $5,304 $5,309 $5,317
Foxtrot Corporation is purchasing a new Ford Transit delivery van for $24,600. Its lender requires a maximum loan to value ratio of 80% on the purchase price of the vehicle. The term of the loan is 5 years. The interest rate is 5% APR. The loan is a closed end credit loan. There is no trade-in. Sales tax is 7%. Documentation fee is $275. a. What is the total cost of the delivery van including purchase price, sales tax, and documentation fee; and how much is classified as an asset on the balance sheet and how much is classified as an expense on the income statement? b. How much cash must Foxtrot Corporation have to make the down payment? c. How much of the first monthly payment will be interest and how much of the last monthly payment will be interest?
New-Markups Department Store has annual credit sales of $ 300 million. John Harris, the collection manager, has estimated that it takes 10 days for a mailed payment to be credited to Newman’s account and that this time can be cut to 5 days if Newman opens up a lockbox account with a local bank. The account in which the checks are placed earns 8.4% annually. The lockbox agreement calls for a monthly payment of $1,350 and, in addition, a monthly charge of $0.06 per check. Newman’s currently processes 120,000 checks monthly. (Treat these expenses as if they occur at the beginning of the year.) a) What are Newman’s daily sales (assuming a 360-day year) b) By how much will Newman’s average bank balance increase if it adopts the lockbox? c) Should Mr Harris adopt the lockbox ? d) Suppose Newman’s has found a regular 20% of its customers account for 80% of credit sales. Should Mr Harris open up the lockbox and use it only for this 20% of the customers?
Anti-Corona, a distributor of facial mask, predicts that it will purchase 306,000 masks next year. Anti-Corona estimates that 25,500 masks will be required each month. A supplier quotes a price of $10 per facial mask. The supplier also offers a special discount option: If all 306,000 masks are purchased at the start of the year, a discount of 3% off the $10 price will be given. Anti-Corona can invest its cash at 12% per year. It costs Anti-Corona $300 to place each purchase order. (a)What is the opportunity cost of interest forgone from purchasing all 306,000 units at the start of the year instead of in 12 monthly purchases of 25,500 units per order? (b) Should Anti-Corona purchase 306,000 units at the start of the year or 25,500 units each month? Show your calculations with reasons 4(c) The company is a multinational company with many branches in different countries around the world. The 12% for return on cash is based on expected return of cash in US. The company is planning to…
A New York City daily newspaper called “Manhattan Today” sells annual subscriptions for a fee of $216. To attract more subscribers, the company offered a package to new subscribers. The $210 cost of the package includes: an annual subscription and a coupon for a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $200 per hour. The company estimates that approximately 30% of the coupons will be redeemed. Required: How much revenue should Manhattan Today recognize upon receipt of the $210 subscription price? How many performance obligations exist in this contract? Prepare the journal entry to recognize sale of 15 new subscriptions, clearly identifying the revenue or deferred revenue associated with each performance obligation.
A loan of $3,000 for a new, high-end laptop computer is to be repaid in 15 end-of-month payments (starting one month from now). The monthly payments are determined as follows. Loan principal Interest for 15 months at 1.5% per month Loan application fee Total Monthly payment = $3,824.25/15 = $254.95 What nominal and effective interest rates per year are actually being paid? Hint: Draw a cash-flow diagram from the perspective of the lender. O C. $3,000 0 $3,000 1 0 2 1 7-- 3 $254.95. HI 2 3 $254.95_ 14 15 15 16 Q Q Q Q C O D. $3,000 $3,000 1 $3,000 675.00 149.25 $3,824.25 1 2 3 2 3 $254.95. 14 $254.95__ 15 15 16 Q Q Q
Your company is evaluating a switch from a cash policy to a net 30 policy. The price per unit is $49, and the variable cost per unit is $20. The company currently sells 100 units per month. Under the proposed policy, the company expects to sell 110 units per month. The required monthly return is 2%. a-What is the effective annualized rate for this “loan” triggered by the credit policy?
Cray Computing needs a 6-month loan for $300,000. Its bank quotes a simple interest rate of 11% on the loan. a.) What is the annual percentage rate (APR) if there is a compensating balance requirement of 30% of the loan amount? b.) What is the effective annual rate (EAR) if there is a compensating balance requirement of 30% of the loan amount?
24) Can i get help with this question please
Calculate the annual cost for commercial paper (CP) on a $10,000,000 CP issue with a 60-day maturity at a discount rate of 7%. The prorated dealer cost for the CP works out to $2,083. The company has arranged for a backup line of credit for $10,000,000, with an annual commitment fee of 25 basis points on the line, working out to a prorated backup credit cost of $4,167. (NOTE: When calculating, round all dollar amounts to whole dollars, and round all other intermediate calculations to four decimal places.) a. 7.93% b. 7.54% c. 7.05% d. 8.14%

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