The Rasputin Brewery is considering using a public warehouse loan as part of its short-term financing....

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The Rasputin Brewery is considering using a public warehouse loan as part of its short-term financing. The firm will require

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Answer 1

Answer #1

Interest expense=(Interest)*(Loan amount)=10.3%*530000=54590

Warehouse fee=(Loan amount)*(Warehouse charges)=.97%*530000=5141

As the warehouse fee payment must be made at the year beginning, so the usable proceeds from the loan are:

=530000-5141=524859

Effective annual rate=(54590+5141)/524859=11.38%

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Answer 2

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