(Cost of commercial paper) Tri-State Enterprises plans to issue commercial paper for the first time in...
(Cost of commercial paper)
Tri-State Enterprises plans to issue commercial paper for the first time in the firm's 35-year history. The firm plans to issue
$550,000
in
270-day
maturity notes. The paper will carry a
10.75
percent rate with discounted interest and will cost Tri-State
$10,000
(paid in advance) to issue.
Note:
Assume a 30-day month and 360-day year.
a. What is the effective cost of credit to Tri-State?
b. What other factors should the company consider in analyzing whether to issue the commercial paper?
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(Cost of commercial paper)
Tri-State Enterprises plans to issue commercial paper for the
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