Management of current liability Blitz Power Ltd. is a manufacturing company that specialises in solar panels. The company has been experiencing significant growth in recent months. To meet the increasing demand, they have been placing larger orders with suppliers but facing challenges managing their cash flow. The company's financial manager is concerned about the potential impact on their working capital and profitability. Blitz Power is considering taking out a loan with Bright Bank to increase the purchases with suppliers: Loan amount R1 750 000. Interest on loan: 5% above prime. A commission of 2% is charged on any advances made. Consider the full amount of the loan as being an advance. The current prime rate is 10%. Q2)Calculate the effective interest rate if Blitz Power Ltd borrows the funds over period of 12 months, and over a period of 6 months
Management of current liability Blitz Power Ltd. is a manufacturing company that specialises in solar panels. The company has been experiencing significant growth in recent months. To meet the increasing demand, they have been placing larger orders with suppliers but facing challenges managing their cash flow. The company's financial manager is concerned about the potential impact on their working capital and profitability. Blitz Power is considering taking out a loan with Bright Bank to increase the purchases with suppliers: Loan amount R1 750 000. Interest on loan: 5% above prime. A commission of 2% is charged on any advances made. Consider the full amount of the loan as being an advance. The current prime rate is 10%. Q2)Calculate the effective interest rate if Blitz Power Ltd borrows the funds over period of 12 months, and over a period of 6 months
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money
Section: Chapter Questions
Problem 9.5DC
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Management of current liability
Blitz Power Ltd. is a manufacturing company that specialises in solar panels. The company has been experiencing significant growth in recent months.
To meet the increasing demand, they have been placing larger orders with suppliers but facing challenges managing their cash flow.
The company's
Blitz Power is considering taking out a loan with Bright Bank to increase the purchases with suppliers:
- Loan amount R1 750 000.
- Interest on loan: 5% above prime.
- A commission of 2% is charged on any advances made. Consider the full amount of the loan as being an advance.
- The current prime rate is 10%.
Q2)Calculate the effective interest rate if Blitz Power Ltd borrows the funds over period of 12 months, and over a period of 6 months
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