Question

Harper Engine Company needs $638,000 to take a cash discount of 1.50/15, net 65. A banker will loan the money for 50 days at an interest cost of $16,800. a. What is the effective rate on the bank loan? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Effective rate of interest L % b. How much would it cost (in percentage terms) if Harper did not take the cash discount but paid the bill in 65 days instead of 15 days? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Cost of not taking a cash discount 10.96 % c. Should Harper borrow the money to take the discount? NO Yes d. If another banker requires a 10 percent compensating balance, how much must Harper borrow to end up with $638,000? (Round your answer to 2 decimal places.) Amount to be borrowed

Answer 1

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VO A 1x 8 ENG 0121 . х CP645 CJ CK CL CM CN CO CP CQ CR CS ст CU CV 624 625 626 627 HARPER 628 16800 X 360/50 = ANNUAL INTEREST 629 120960.00 ANNUAL RATE ON LOAN = 120960/638000 = 18.96% 630 %3D 631 NOMINAL COST OF TRADE CREDIT = 632 ((discount / (1-discount))*(365 / (TOTAL PAY PERIOD - DISCOUNT PERIOD)) 633 634 ((0.015/(1-0.015))*(360/(65-15)) = 10.96% 635 636 637 NO 638 AMOUNT TO BE BORROWED = 638000/(1-0.10) = 708889 639 640 14400*360/50 = 103680/638000 641 e-1 INTEREST FOR THE YEAR 103680.00 ANNUAL RATE ON LOAN = 16.25% 642 643 644 e-2 NO 645 646 647 648 649 MULTIPLE GROWTH | RR-NR-BOND RATIO CCA CVP Sheel1 thom loan oplions show -BEP-performance sensilivily MDURATION CRDIT POLICY KE