us Communication Ltd has the option of issuing commercial papers with a denomination of $20,000 per paper and a floatation cost of $200 per paper to raise $600,000 capital that it requires for 150 days. Interest rate is expected to b
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Circus Communication Ltd has the option of issuing commercial papers with a denomination of $20,000 per paper and a floatation cost of $200 per paper to raise $600,000 capital that it requires for 150 days. Interest rate is expected to be 12% per annum. Compute the amount of processing fees that the company has to bear when issuing the commercial papers.
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- Mas-Con is considering the issuance of commercial paper to fund working capital requirements of $6.4M for 50 days. Mas-Con receives quotes from a dealer of a 0.95% discount rate, a commitment fee of 0.35% on a $4.5M unused line of credit to back the commercial paper, and a dealer fee of 0.2%. What is the effective cost of this commercial paper?Miracle Bhd requires RM500,000 ti finance its operations. The following short-termresources of financing are available: Alternative I A loan from OCS Bank with simple interest rate of 9 percent per annum for 3 months. A 20 percent compensating balance is required. Alternative II Issue commercial papers at a face value of RM5,000 per paper. The interest is 8 percent per annum for 270 days maturity period. The issuing cost is RM150 per paper. Alternative III A revolving line of credit of RM550,000 for a 1 percent commitment fee on the unused funds and an 8 percent interest rate. i) Calculate the effective interest rate for each alternative. ii) Justify the best alternative for Miracle Bhd.Company is contemplating factoring its accounts receivable. The factor will acquire P250,000 of the company’s accounts receivable every 2 months. An advance of 75 percent is given by the factor on receivables at an annual charge of 18 percent. There is a 2 percent factor fee associated with receivables purchased. What is the cost of the factoring arrangement? choose the letter of the correct answera. P30,000.00b. P33,750.00c. P63,750.00d. P103,000.00e. P125,000.00
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- Racman, Inc. needs P2,000,000 to finance its extension program. Racman, Inc. is negotiating a loan with Metropolis Bank which requires the company to maintain a compensating balance of 10% of the loan principal on deposit in a current account at the bank. Pierce, Inc. currently maintains a balance of P20,000 in its current account. The current account earns interest of 2% per annum. The interest rate on the loan is 12% per annum. 1. What is the effective interest rate on the loan?2. Mala-Inse Company needs P5,000,000 short-term credit for 90 days. To produce the amount, the company intends to sell commercial paper with a discount rate of 15%, issuance cost of P75,000 and other flotation cost of P15,000. Determine the simple cost of financing? (round to 4 decimal places)Halliday Inc. receives a $2 million payment once a year. Of this amount, $700,000 is needed for cash payments made during the next year. Each time Halliday deposits money in its account, a charge of $2.00 is assessed to cover clerical costs. If Halliday can hold marketable securities that yield 5 percent, and then convert these securities to cash at a cost of only the $2 deposit charge, what is the total cost for one year of holding the minimum cost cash balance according to the Baumol model?