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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- Gale Corporation recently issued 270-day commercial paper with a face value of $100,000 and a simple interest rate of 11 percent. Assuming there are 360 days in a year, what is the commercial paper's annual percentage rate (APR)? The firm incurs no transaction costs to issue the commercial paper.Bowl Corporation has obtained a line of credit facility of $1 million from Plate Bank at 6% interest per annum to meet its $900,000 capital requirement. The capital is needed by Bowl Corporation for 100 days. The bank requires a 2% commitment fee and $50,000 compensating balance. Compute the amount of interest that has to be paid by Bowl Corporation to the bank for the line of credit.Hot Dog World is able to raise funds by issuing commercial paper with a face value of $500,000. If commercial paper is issued, the simple interest rate will be 4.5%, the time maturity woul dbe 90 days, and the compnay woul dhave tp pay a transaction fee equal to 0.75% of the issue which would be taken out of the issue amount. Compute the commercial paper's APR and rEAR.
- Daegu Corporation has decided to borrow from Jeju Bank at 10% interest per annum to raise KRW600,000 capital for a period of 150 days. Daegu is required to maintain 6% compensating balance with Jeju Bank. Compute the effective interest rate if the firm uses the above alternative to raise capital.Commercial paper. Toro, the Wisconsin-based AA-rated manufacturer of snow-blowers and lawn mowers, anticipates that because of the seasonal nature of its business it will require an additional US$250 million for working capital during the second quarter (April, May, and June). The funding options are: Commercial paper issued for 90 days at the annual interest rate of 4.75 percent. Issuance cost, including the expense of a backup line of credit (credit enhancement), is 50 basis points of the amount issued. c. Would the funding cost faced by Toro be different if it were AAA-rated?d. Would you recommend that Toro select the cheaper funding option?Commercial paper. Toro, the Wisconsin-based AA-rated manufacturer of snow-blowers and lawn mowers, anticipates that because of the seasonal nature of its business it will require an additional US$250 million for working capital during the second quarter (April, May, and June). The funding options are: Commercial paper issued for 90 days at the annual interest rate of 4.75 percent. Issuance cost, including the expense of a backup line of credit (credit enhancement), is 50 basis points of the amount issued.a. Compute the cost of each funding option.b. How do you explain the difference in funding cost?
- A company is bidding to buy a fleet of lorries for £ 15,600,000. Payment on delivery 1,000,000 TL in advance is realized as 1,297,200 TL for each subsequent month. Another seller makes the same delivery by applying 1% interest per month to the outstanding amount he suggests. Which offer is more advantageous?angel co. has P500,000 in receivable that carries a 30-day credit term, 2% factor’s fee, 5% holdback reserve, and an interest of 12% per annum on advances. Use 360 days. What is the effective annual financing cost of factoring?Every 15 days a company receives P10,000 worth of raw materials from its suppliers. The credit terms for these purchases are 2/15, net 30, and payment is made on the 30th day after each delivery. Thus, the company is considering a 1-year bank loan for P9,800 (98% of the invoice amount). If the effective annual interest rate on this loan is 12%, what will be the net peso savings over the year by borrowing and then taking the discount on the materials?
- Kristo Asafo Tools Ltd is filling an order from a Korean industrial company for machinery worth 160,000,000 Won. The export sale is denominated in Korean Won and is on a one-year open account basis. The opportunity cost of funds for Kristo Asafo Tools Ltd is 8% The Current spot rate between Won and Dollars is 800 Won/$. The forward Won sells at a discount of 12% per annum, but the finance staff of Kristo Asafo Tools Believes that the Won will drop only 9% in value over the next year. Kristo Asafo Tools Ltd faces the following choices This question compares the cost of a money market hedge with a forward hedge, and considers both alternatives against the possibility of remaining unhedged. a) Wait one year to receive the won amount and exchange Won for dollars at that time b) Sell the Won proceeds of the sale forward today c) Borrow Won from a Seoul bond at 20% per annum against the expected future receipt of the Korean importer’s payment d) What do you recommend and why?Uptown Bank has granted a line of credit of $80,000 with an interest rate of 7.5 percent and a compensating balance requirement of 2.5 percent to Jones Hardware. The compensating balance requirement is based on the total amount borrowed. What is the effective annual interest rate if the firm needs $55,000 for one year to finance its inventory? Group of answer choicesCommercial paper. Toro, the Wisconsin-based AA-rated manufacturer of snow-blowers and lawn mowers, anticipates that because of the seasonal nature of its business it will require an additional US$250 million for working capital during the second quarter (April, May, and June). The funding options are: Bank loan from Wachovia Trust in the form of a one-year line of credit for US$250 million at the annual rate of 6 percent. Wachovia charges a commitment fee of 0.5 percent on the unused portion of the line of credit. (Need explanation for this question) Commercial paper issued for 90 days at the annual interest rate of 4.75 percent. Issuance cost, including the expense of a backup line of credit (credit enhancement), is 50 basis points of the amount issued.a. Compute the cost of each funding option.b. How do you explain the difference in funding cost?c. Would the funding cost faced by Toro be different if it were AAA-rated?d. Would you recommend that Toro select the cheaper funding…