COCO Inc. has a credit agreement which is revolving fund with its bank under which it can borrow up to Php10 million at an annual interest rate of 12 percent. The firm is required to maintain a 10 percent compensating balance on any funds borrowed under this agreement and to pay a 0.5 percent commitment fee on the unused portion of the credit line. Determine the annual financing cost to COCO Inc. of borrowing Php4 million. a. 13.3% b. 14.7% c. 14.2%

COCO Inc. has a credit agreement which is revolving fund with its bank under which it can borrow up to Php10 million at an annual interest rate of 12 percent. The firm is required to maintain a 10 percent compensating balance on any funds borrowed under this agreement and to pay a 0.5 percent commitment fee on the unused portion of the credit line. Determine the annual financing cost to COCO Inc. of borrowing Php4 million. a. 13.3% b. 14.7% c. 14.2%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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a. 13.3%

b. 14.7%

c. 14.2%

d. 13.9%

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