CONTEMP.FINANCIAL MGMT. (LL)-W/MINDTAP
14th Edition
ISBN: 9780357292877
Author: MOYER
Publisher: CENGAGE L
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 16, Problem 23P
Summary Introduction
To determine: The annual financing cost.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Commercial paper is usually sold at a discount. Tan Corporation has just sold an issue of 90-day commercial paper with a face value of $1 million. The firm has received initial proceeds of $978,000. (Note: Assume a 365-day year.)
1.If a brokerage fee of $9,612 was paid from the initial proceeds to an investment banker for selling the issue, what effective annual rate will the firm pay, assuming that the paper is rolled over every 90 days throughout the year? Format: 11.11%
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
Commercial paper is usually sold at a discount. Fan Corporation has just sold an issue of 103-day commercial paper with a face value of $1.5 million. The firm has received initial proceeds of
$1,473,557. (Note: Assume a 365-day year.)
a. What effective annual rate will the firm pay for financing with commercial paper, assuming that it is rolled over every 103 days throughout the year?
b. If a brokerage fee of $13,986 was paid from the initial proceeds to an investment banker for selling the issue, what effective annual rate will the firm pay, assuming that the paper is rolled over every
103 days throughout the year?
Answers
a. The effective annual rate the firm will pay for financing with commercial paper, assuming that it is rolled over every 103days throughout the year, is ___%.(Round to two decimal places.)
b. The effective annual rate the firm will pay with the brokerage fee, assuming that the paper is rolled over every 103 days throughout the year, is…
Chapter 16 Solutions
CONTEMP.FINANCIAL MGMT. (LL)-W/MINDTAP
Ch. 16 - Prob. 1QTDCh. 16 - Prob. 2QTDCh. 16 - Prob. 3QTDCh. 16 - Prob. 4QTDCh. 16 - Prob. 5QTDCh. 16 - Prob. 6QTDCh. 16 - Prob. 7QTDCh. 16 - Prob. 8QTDCh. 16 - Prob. 9QTDCh. 16 - Prob. 10QTD
Ch. 16 - Prob. 11QTDCh. 16 - Prob. 12QTDCh. 16 - Prob. 13QTDCh. 16 - Prob. 14QTDCh. 16 - Prob. 15QTDCh. 16 - Prob. 16QTDCh. 16 - Prob. 17QTDCh. 16 - Prob. 18QTDCh. 16 - Prob. 19QTDCh. 16 - Prob. 20QTDCh. 16 - Prob. 21QTDCh. 16 - Prob. 22QTDCh. 16 - Prob. 23QTDCh. 16 - Prob. 24QTDCh. 16 - Prob. 1PCh. 16 - Prob. 2PCh. 16 - Prob. 3PCh. 16 - Prob. 4PCh. 16 - Prob. 5PCh. 16 - Prob. 6PCh. 16 - Prob. 7PCh. 16 - Prob. 8PCh. 16 - Prob. 9PCh. 16 - Prob. 10PCh. 16 - Prob. 11PCh. 16 - Prob. 12PCh. 16 - Prob. 13PCh. 16 - Prob. 14PCh. 16 - Prob. 15PCh. 16 - Prob. 16PCh. 16 - Prob. 17PCh. 16 - Prob. 18PCh. 16 - Prob. 19PCh. 16 - Prob. 20PCh. 16 - Prob. 21PCh. 16 - Prob. 22PCh. 16 - Prob. 23PCh. 16 - Prob. 24PCh. 16 - Prob. 25PCh. 16 - Prob. 26PCh. 16 - Prob. 27PCh. 16 - Prob. 28PCh. 16 - Prob. 29PCh. 16 - Prob. 30PCh. 16 - Prob. 31PCh. 16 - Prob. 32PCh. 16 - Prob. 33PCh. 16 - Prob. 34P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- 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.arrow_forwardThis scenario relates to three requirements. Nesud Co has credit sales of $45 million per year and on average settles accounts with trade payables after 60 days. One of its suppliers has offered the company an early settlement discount of 0.5% for payment within 30 days. Administration costs will be increased by $500 per year if the early settlement discount is taken. Nesud Co buys components worth $1.5 million per year from this supplier. From a different supplier, Nesud Co purchases $2.4 million per year of Component K at a price of $5 per component. Consumption of Component K can be assumed to be at a constant rate throughout the year. The company orders components at the start of each month in order to meet demand and the cost of placing each order is $248.44. The holding cost for Component K is $1.06 per unit per year. The finance director of Nesud Co is concerned that approximately 1% of credit sales turn into irrecoverable debts. In addition, she has been advised that customers…arrow_forwardAn industrial firm can purchase a certain machine for $40.000. A down payment of S-1.000 is required. and the balance can be paid in five eq ual year-end installments at 7% interest on the unpaid balance. As an alternative. the machine can be purchased for $36,000 in cash. If the firm 's MARR is 10%, determine which alternative should be accepted using the annual- equivalence method.arrow_forward
- An industrial firm can purchase a certain machine for $40.000. A down payment of S-1.000 is required. and the balance can be paid in five equal year-end installments at 7% interest on the unpaid balance. As an alternative. the machine can be purchased for $36,000 in cash. If the firm 's MARR is 10%, determine which alternative should be accepted using the annual equivalence method.arrow_forwardDanial company plans to sell RM400,000 in 90-days maturity paper on which the expected discounted interest to be paid 10 percent per annum. The dealer placement fee is RM3,000 per paper, and the par value of these commercial papers is RM40,000 each. Calculate the cost of issuing commercial paper. Answer 44.44 percent 4.44 percent 10.19 percent 11.11 percentarrow_forwardXYZ Corp. entered into a long forward contract for 125 pieces of 1-ounce silver at a fixed price of P1,320 to be delivered one year from now. Its current price is P1,330. After one year, the price of silver was P1,340. What is the purchase price that XYZ will be paying for its order?arrow_forward
- 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?arrow_forwardTerrific Corporation, an equipment distributor, sells a piece of machinery with a list price of P800,000 to Archer Company. Per agreement, Archer will pay P850,000 in one year evidenced by a note. Terrific normally sells at cash price equivalent to 90% of list price. The note has a market rate of 12%. How much should be recorded as Sales? (The PV of 1 at 12% for 1 year is 0.89) P756,500 P850,000 P720,000 P800,000arrow_forwardBulldogs Inc. enters into an agreement with a firm that will factor the company’s accounts receivable. The factor agrees to buy the company’s receivables, which average P100,000 per month and have an average collection period of 30 days. The factor will advance up to 80% of the face value of receivables at an annual rate of 10% and a charge fee of 2% on all receivables purchased. The controller of the company estimates that the company would save P18,000 in collection expenses over the year. Fees and interest are not deducted in advance. Assuming a 360-day year, what is the annual cost of financing? a. 12% b. 17.5% c. 10% d. 14%arrow_forward
- Manning Imports is contemplating an agreement to lease equipment to a customer for four years. Manning normally sells the asset for a cash price of $230,000. .Assume that 8% is a reasonable rate of interest. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) What must be the amount of quarterly lease payments (beginning at the commencement of the lease) in order for Manning to recover its normal selling price as well as be compensated for financing the asset over the lease term? (Round your answers to nearest whole number and round percentage answer to 1 decimal place.)arrow_forwardCommercial paper is usually sold at a discount. Mucus Corporation has just sold an issue of 90-day commercial paper with a face value of $1 million. The firm has received initial proceeds of $978,000. Show Solutions and Explanation. (Note: Assume a 365-day year.) A. What effective annual rate will the firm pay for financing with commercial paper, assuming that it is rolled over every 90 days throughout the year? (Format: 1.11%) B. If a brokerage fee of $9,612 was paid from the initial proceeds to an investment banker for selling the issue, what effective annual rate will the firm pay, assuming that the paper is rolled over every 90-days throughout the year? (Format: 11.11%)arrow_forwardCommercial paper is usually sold at a discount. Fan Corporation has just sold an issue of 90-day commercial paper with a face value of $1 million. The firm has received initial proceeds of $978,000. (Note: Assume a 365-day year.) 1.What effective annual rate will the firm pay for financing with commercial paper, assuming that it is rolled over every 90 days throughout the year? Format: 1.11% 2.If a brokerage fee of $9,612 was paid from the initial proceeds to an investment banker for selling the issue, what effective annual rate will the firm pay, assuming that the paper is rolled over every 90 days throughout the year? Format: 11.11%arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Debits and credits explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=n-lCd3TZA8M;License: Standard Youtube License