Paymaster Enterprises has arranged to finance its seasonal? working-capital needs with a? short-term bank loan. The...
Paymaster Enterprises has arranged to finance its seasonal? working-capital needs with a? short-term bank loan. The loan will carry a rate of 14 percent per annum with interest paid in advance? (discounted). In? addition, Paymaster must maintain a minimum demand deposit with the bank of 11 percent of the loan balance throughout the term of the loan. If Paymaster plans to borrow $90,000 for a period of 4 ?months, what is the annualized cost of the bank? loan? (Round to 2 decimal places)
Homework Answers
Interest expense = 0.14*90000*4/12 =$4200
Assuming that Paymaster has to leave 11% of the loan idle in a compensating balance the annualized cost of the bank loan can be calculated as follow:
11% of Loan =0.11*90000 = $9900, Interest amount will deduct from loan (Discount loan)
annualized cost of the bank loan = 4200*12/(90000-9900-4200)*4 = 12600/75900
Annualized cost of the bank loan = 16.60%
Add Answer to:
Paymaster Enterprises has arranged to finance its seasonal?
working-capital needs with a? short-term bank loan. The...
Exercises #11 1. Xtra Corporation needs $50,000 for three months to finance its working capital. The company has arranged a short-term loan with a bank. The bank charges 8% annual interest rate wi...
Exercises #11 1. Xtra Corporation needs $50,000 for three months to finance its working capital. The company has arranged a short-term loan with a bank. The bank charges 8% annual interest rate with interest paid in advance. The bank also requires 5% of the borrowed amount as a compensating balance. Assume Xtra does not have money to serve as a compensating balance and pay interest upfront 1.1 How much Xtra have to borrow? 1.2 Find effective cost of bank loan...
nitiduri APK 18-8A/(Cost of short-term bank loan) The Southwest Forging Corporation recently arranged for a line...
nitiduri APK 18-8A/(Cost of short-term bank loan) The Southwest Forging Corporation recently arranged for a line of credit with the First National Bank of Dallas. The terms of the agreement called for a $100,000 maximum loan with interest set at 1 percent over prime. In addition, the firm has to maintain a 20 percent compensating balance in its demand deposit account throughout the year. The prime rate is currently 12 percent. V a. If Southwest normally maintains a $20,000 to...
short term finance and planning.
Mutiara Bhd recently arranged for a line of credit with the Permata Bank. The terms of the agreement called for a RM150,000 maximum loan with interest set at 12% per annum for 6-month. In addition, Mutiara’s must maintain a 5% compensating balance in its demand deposit throughout the year.
(Related to Checkpoint 18.2) (Calculating the cost of short-term financing) The R. Morin Construction Company needs...
(Related to Checkpoint 18.2) (Calculating the cost of short-term financing) The R. Morin Construction Company needs to borrow $90,000 to help finance the cost of a new $135,000 hydraulic crane used in the firm's commercial construction business. The crane will pay for itself in one year, and the firm is considering the following alternatives for financing its purchase: Alternative A. The firm's bank has agreed to lend the $90,000 at a rate of 12 percent. Interest would be discounted, and...
Short term financing
Mutiara Bhd recently arranged for a line of credit with the Permata Bank. The term of the agreement called for a RM150000 maximum loan with interest set at 12% per annum for 6-month. In addition, Mutiara must maintain a 5% compensating balance in its demand deposit throughout the year. If mutiara normally maintains RM25000 balance in its checking account with Permata Bank, what is the effective of credit through the...
(Cost of short-term bank loan) On July 1, 2015, the Southwest Forging Corporation arranged for a line of credit with the First National Bank (FNB) of Dallas. The terms of the agreement call for a $100...
(Cost of short-term bank loan) On July 1, 2015, the Southwest Forging Corporation arranged for a line of credit with the First National Bank (FNB) of Dallas. The terms of the agreement call for a $100,000 maximum loan with interest set at 1 percent over prime. In addition, the firm has to maintain a 20 percent compensating balance in its demand deposit account throughout the year. The prime rate is currently 4.5 percent. If Southwest normally maintains a $20,000 to...
(Related to Checkpoint 18.2) (Calculating the cost of short-term financing) The R. Morin Construction Company needs...
(Related to Checkpoint 18.2) (Calculating the cost of short-term financing) The R. Morin Construction Company needs to borrow $120,000 to help finance the cost of a new $180,000 hydraulic crane used in the firm's commercial construction business. The crane will pay for itself in one year, and the firm is considering the following alternatives for financing its purchase: Alternative A. The firm's bank has agreed to lend the $120,000 at a rate ofb13percent. Interest would be discounted, and a 15...
Cost of short-term financing) The R. Morin Construction Company needs to borrow $90 comma 000 to...
Cost of short-term financing) The R. Morin Construction Company needs to borrow $90 comma 000 to help finance the cost of a new $126 comma 000 hydraulic crane used in the firm's commercial construction business. The crane will pay for itself in 1 year, and the firm is considering the following alternatives for financing its purchase: Alternative Along dashThe firm's bank has agreed to lend the $90 comma 000 at a rate of 12 percent. Interest would be discounted, and...
2. Types of short-term bonds Short-term debt securities have a maturity of one year or less....
2. Types of short-term bonds Short-term debt securities have a maturity of one year or less. The characteristics of the debt securities will depend upon the capital n borrower and the investment needs of the lender. In the following table, identify the term that best matches each type of short-term d being described Definit Term Tiger Telecommunications Company needs to borrow $1 million overnight and is willing to secure the loan with a portfolio of securities that the borrower will...
(Cost of secured short-term credit) The Marlow Sales and Distribution Co. needs $540,000 for the 3-month...
(Cost of secured short-term credit) The Marlow Sales and Distribution Co. needs $540,000 for the 3-month period ending September 30, 2015. The firm has explored two possible sources of credit a. Marlow has arranged with its bank for a $540,000 loan secured by its accounts receivable. The bank has agreed to advance Marlow 75 percent of the value of its pledged receivables at a rate of 11 percent plus a 1 percent fee based on all receivables pledged Marlow's receivables...
Exercises #11 1. Xtra Corporation needs $50,000 for three months to finance its working capital. The company has arranged a short-term loan with a bank. The bank charges 8% annual interest rate with interest paid in advance. The bank also requires 5% of the borrowed amount as a compensating balance. Assume Xtra does not have money to serve as a compensating balance and pay interest upfront 1.1 How much Xtra have to borrow? 1.2 Find effective cost of bank loan...
nitiduri APK 18-8A/(Cost of short-term bank loan) The Southwest Forging Corporation recently arranged for a line of credit with the First National Bank of Dallas. The terms of the agreement called for a $100,000 maximum loan with interest set at 1 percent over prime. In addition, the firm has to maintain a 20 percent compensating balance in its demand deposit account throughout the year. The prime rate is currently 12 percent. V a. If Southwest normally maintains a $20,000 to...
2. Types of short-term bonds Short-term debt securities have a maturity of one year or less. The characteristics of the debt securities will depend upon the capital n borrower and the investment needs of the lender. In the following table, identify the term that best matches each type of short-term d being described Definit Term Tiger Telecommunications Company needs to borrow $1 million overnight and is willing to secure the loan with a portfolio of securities that the borrower will...
(Cost of secured short-term credit) The Marlow Sales and Distribution Co. needs $540,000 for the 3-month period ending September 30, 2015. The firm has explored two possible sources of credit a. Marlow has arranged with its bank for a $540,000 loan secured by its accounts receivable. The bank has agreed to advance Marlow 75 percent of the value of its pledged receivables at a rate of 11 percent plus a 1 percent fee based on all receivables pledged Marlow's receivables...
Most questions answered within 3 hours.
-
1.
A hemophiliac male mates with a healthy female. what are the
possible genotypes for the...
asked 12 minutes ago -
You could argue that even though Rockefeller clearly had
enormous market power (90% of the market)...
asked 27 minutes ago -
At the beginning of the year, Palermo Brothers, Inc., purchased
a new plastic water bottle making...
asked 26 minutes ago -
Calculate the change in the Gibbs energy of the system for the
following processes: a) 6.0...
asked 16 minutes ago -
After reading the Primary Care scenario in the Allied Health
Community, what could have been implemented...
asked 20 minutes ago -
A solution is prepared by dissolving 11.60 g of a mixture of
sodium carbonate and sodium...
asked 25 minutes ago -
1. Mini Case Study: Suppose that, in the future, most jobs will
be bid upon by...
asked 27 minutes ago -
Plantinga argues for the view that there is no solution to the
problem of moral evil....
asked 23 minutes ago -
For this Discussion, you examine a case study of
hearing-impaired children who developed their own language...
asked 28 minutes ago -
The moment of inertia of a disk rotating about its axis of
symmetry is Icm=1/2MR^2
The...
asked 34 minutes ago -
When using a relational database what makes data
formatting so important and critical to the functions...
asked 45 minutes ago -
The following temperatures show the (fictional) daily low
measured at O'Hare airport every January 1st from...
asked 1 hour ago