To discuss: Whether Person X must borrow on credit line or he should accept the offer from Company FP.
Introduction:
The maximum amount of loan a bank can avail to the customers is termed as line of credit.
Explanation of Solution
When Company FP pays Person X $150,000 in cash then he has to pay then with interest of $155,000. The interest rate will be
Thus, the bank credit line seems to be a better deal. If Company FP has no other recourse or option to Person X’s firm, then the adviser must make the choices because the bank credit is based on the creditability of the firm. Thus pledging will be risker under this case. So here he can opt for the Company FP.
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Chapter 16 Solutions
EBK PRINCIPLES OF MANAGERIAL FINANCE
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- College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub