Dalagang Pilipina Company needs ₱5,000,000 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 ₱75,000 and other flotation cost of ₱15,000. How large should the commercial paper issue be to achieve the needed amount? (nearest peso amount)

Dalagang Pilipina Company needs ₱5,000,000 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 ₱75,000 and other flotation cost of ₱15,000. How large should the commercial paper issue be to achieve the needed amount? (nearest peso amount)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 22P

See similar textbooks

Similar questions

2. Mala-Inse Company needs ₱5,000,000 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 ₱75,000 and other flotation cost of ₱15,000. Determine the simple cost of financing? (round to 4 decimal places)
Every 15 days a company receives P10,000 worth of raw materials from its suppliers. The credit terms for these purchases are 2/15, net 30, and payment is made on the 30th day after each delivery. Thus, the company is considering a 1-year bank loan for P9,800 (98% of the invoice amount). If the effective annual interest rate on this loan is 12%, what will be the net peso savings over the year by borrowing and then taking the discount on the materials?
To pay its supplier, Tokyo Corporation requires P300,000. The bank of Tokyo Corporation offers a 210-day loan with a simple interest rate of 11 percent and a compensating balance requirement of 20 percent. Given that there are 360 days in a year and Tokyo Corporation has no funds at the lending bank, what is the annual percentage rate (APR) of the loan? a. 14.14% b. 12.55% c. 8.02% d. 11.00% e. 13.75%
A company is considering raising of `50 crore by issuing CPs for 90 days. CPs will be sold at a discount of 10 per cent. Stamp duty charges will be 0.5 per cent of the size of the issue. The issuing and other charges will amount to `2.50 lakh and rating charges to 0.40 per cent of the issue size. Calculate the effective cost of CP.
CBA collects its receivables after 25 days on the average, so that they amount to P75,000. A proposal has been made to shorten the credit term to 20 days or by 5 days. Said proposal will reduce receivables (or reduce cash requirement) by P15,000, Assuming 15% cost of money, how much is the expected savings in financing charges?
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.
A company can issue a 45-day $10 million commercial paper at a rate of 4.50%. It can reduce the rate to 4.35% if it is backed by a standby letter of credit (SBLC). A bank is willing to issue the SBLC for a fee of 10 basis points. The following is true: A The fee for issuing the SBLC is $10,000 B The net savings to the issuer is $1,250 C The amount received by the issuer for the commercial paper without an SBLC is $9,945,625. D The difference in the amount received by the issuer with and without the SBLC is $1,875.
To increase its sales, a wholesale company offers its customers a promotion that consists of paying only 30% of the value of the merchandise at the time of delivery and 2 payments of 20 thousand pesos each at 90 and 180 days. If the compound interest rate is 11.45% per year with daily compounding, what is the cash value of said commodity?
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?