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The Finance Manager is trying to ensure that the company’s excess cash holdings are all invested in interest-bearing short-term instruments. Carrium’s bankers have provided details on enhanced savings accounts that is offered to business clients: Option 1: Annual interest rate of 8%, compounded weekly; Option 2: Annual interest rate of 8.25%, compounded monthly; Option 3: Annual interest rate of 8.30%. Required: Advise the Finance Manager on the best option.

The Finance Manager is trying to ensure that the company’s excess cash holdings are all invested in interest-bearing short-term instruments. Carrium’s bankers have provided details on enhanced savings accounts that is offered to business clients: Option 1: Annual interest rate of 8%, compounded weekly; Option 2: Annual interest rate of 8.25%, compounded monthly; Option 3: Annual interest rate of 8.30%. Required: Advise the Finance Manager on the best option.

Essentials Of Investments
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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The Finance Manager is trying to ensure that the company’s excess cash holdings are all invested in interest-bearing short-term instruments. Carrium’s bankers have provided details on enhanced savings accounts that is offered to business clients:

Option 1: Annual interest rate of 8%, compounded weekly;

Option 2: Annual interest rate of 8.25%, compounded monthly;

Option 3: Annual interest rate of 8.30%.

Required: Advise the Finance Manager on the best option.

CASE ANALYSIS - CARRIUM INSIGHTS INC. The following comprehensive assessment is based on a continuing case study of Carrium Insights Inc. The following financial statements have been provided: Carrium Insights Inc. Income Statement For the year ended December 31, 2020 2020 ('000s) 2,800 Sales Cost of Goods Sold Selling & Marketing Costs Admin. Expenses Depreciation Expense Eamings before Interest & Taxes Interest Expense (1,400) (75) (25) (50) 1,250 (20) 1,230 Taxable Income Taxation (20%) Net Income (246) 984 Dividends (50%) Addition to Retained Eamings 492 492 Carrium Insights Inc. State ment of Financial Positi on As at December 31, 2019 & 2020 2019 2020 2019 2020 ('000s) ('000s) ('000s) ('000s) ASSETS LIABILITIES & EQUITY Current Asse ts Current Liabilities Inventories 600 680 Accounts Payables Nates Payables 1,100 1,360 Accounts Receivables 300 340 700 860 1,340 2,360 Cash & Equivalents 1, 100 1,800 2,220 2,000 Non-current Liabilites 770 568 Non Current Asse ts, Net 1,870 2,240 Total Liabilities 2,570 2,788 Equity Common Stock 820 840 Retained Eamings Total Equity 480 972 1,300 1,812 TOTAL ASSETS 3,870 4,600 TOTAL LIAB. & EQUITY 3,870 4,600
Transcribed Image Text:CASE ANALYSIS - CARRIUM INSIGHTS INC. The following comprehensive assessment is based on a continuing case study of Carrium Insights Inc. The following financial statements have been provided: Carrium Insights Inc. Income Statement For the year ended December 31, 2020 2020 ('000s) 2,800 Sales Cost of Goods Sold Selling & Marketing Costs Admin. Expenses Depreciation Expense Eamings before Interest & Taxes Interest Expense (1,400) (75) (25) (50) 1,250 (20) 1,230 Taxable Income Taxation (20%) Net Income (246) 984 Dividends (50%) Addition to Retained Eamings 492 492 Carrium Insights Inc. State ment of Financial Positi on As at December 31, 2019 & 2020 2019 2020 2019 2020 ('000s) ('000s) ('000s) ('000s) ASSETS LIABILITIES & EQUITY Current Asse ts Current Liabilities Inventories 600 680 Accounts Payables Nates Payables 1,100 1,360 Accounts Receivables 300 340 700 860 1,340 2,360 Cash & Equivalents 1, 100 1,800 2,220 2,000 Non-current Liabilites 770 568 Non Current Asse ts, Net 1,870 2,240 Total Liabilities 2,570 2,788 Equity Common Stock 820 840 Retained Eamings Total Equity 480 972 1,300 1,812 TOTAL ASSETS 3,870 4,600 TOTAL LIAB. & EQUITY 3,870 4,600
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