The bank has granted an overdraft facility to ABC company for the period. The overdraft facility amount is USD 1700000. The interest rate on the overdraft facility taken is 13% per annum, and the overdraft facility commission is set at 3% and is to be paid in advance. It is anticipated that within the first period (i. e. 100 days), the company will benefit from USD 885000 of the overdraft facility granted, and within the next 170 days from USD 685000 of the overdraft facility granted. Calculate the effective annual cost of using the overdraft facility by the companycompany.
The bank has granted an overdraft facility to ABC company for the period. The overdraft facility amount is USD 1700000. The interest rate on the overdraft facility taken is 13% per annum, and the overdraft facility commission is set at 3% and is to be paid in advance. It is anticipated that within the first period (i. e. 100 days), the company will benefit from USD 885000 of the overdraft facility granted, and within the next 170 days from USD 685000 of the overdraft facility granted. Calculate the effective annual cost of using the overdraft facility by the companycompany.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The bank has granted an overdraft facility to ABC company for the period. The overdraft facility amount is USD 1700000. The interest rate on the overdraft facility taken is 13% per annum, and the overdraft facility commission is set at 3% and is to be paid in advance. It is anticipated that within the first period (i. e. 100 days), the company will benefit from USD 885000 of the overdraft facility granted, and within the next 170 days from USD 685000 of the overdraft facility granted. Calculate the effective annual cost of using the overdraft facility by the companycompany.
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