Pearson Etext For Foundations Of Finance -- Combo Access Card (10th Edition)

10th Edition

ISBN: 9780135639344

Author: Arthur J. Keown, John D Martin, J. William Petty

Publisher: PEARSON

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Textbook Question

Chapter 15, Problem 6SP

(Cost of secured short-term credit) The Marlow Sales and Distribution Co. needs $1.5 million for the 3-month period ending September 30, 2015. The firm has explored two possible sources of credit.

a. Marlow has arranged with its bank for a $1.5 million loan secured by its accounts receivable. The bank has agreed to advance Marlow 75 percent of the value of its pledged receivables at a rate of 9 percent plus a 1 percent fee based on all receivables pledged. Marlow’s receivables average a total of $1.75 million year-round.
b. An insurance company has agreed to lend the $1.5 million at a rate of 8 percent per annum, using a loan secured by Marlow’s inventory of salad oil. A field-warehouse agreement would be used, which would cost Marlow $2,000 a month. Which source of credit should Marlow select? Explain.

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Chapter 15, Problem 5SP

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Chapter 15 Solutions

Pearson Etext For Foundations Of Finance -- Combo Access Card (10th Edition)

Ch. 15 - Dell Computer Corporation (DELL) has long been...Ch. 15 - Prob. 2RQ Ch. 15 - Prob. 3RQ Ch. 15 - Prob. 4RQ Ch. 15 - Explain what is meant by the statement The use of...Ch. 15 - Prob. 6RQ Ch. 15 - Prob. 7RQ Ch. 15 - How can the formula interest = principle rate ...Ch. 15 - How can we accommodate the effects of compounding...Ch. 15 - Prob. 10RQ

Ch. 15 - Prob. 11RQ Ch. 15 - Prob. 12RQ Ch. 15 - Prob. 1SP Ch. 15 - Prob. 2SP Ch. 15 - Prob. 3SP Ch. 15 - (Estimating the cost of bank credit) Paymaster...Ch. 15 - (Cost of short-term financing) The R. Morin...Ch. 15 - (Cost of secured short-term credit) The Marlow...Ch. 15 - (Cost of short-term financing) You plan to borrow...Ch. 15 - Prob. 8SP Ch. 15 - (Cost of trade credit) Calculate the effective...Ch. 15 - (Annual percentage yield) Compute the cost of the...Ch. 15 - Prob. 11SP Ch. 15 - (Cost of accounts receivable) The Michelin...Ch. 15 - (Cost of accounts receivable) The Michelin...Ch. 15 - (Cost of factoring) MDM, Inc. is considering...Ch. 15 - (Cost of factoring) A factor has agreed to lend...Ch. 15 - Prob. 16SP Ch. 15 - Prob. 17SP

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Solution Summary: The author calculates the effective rate of loan on pledged accounts receivables. The APR under this case is 14.3%.

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Chapter 15 Solutions