COCO Inc. has a credit agreement which is revolving fund with its bank under which it can borrow up to Php10 million at an annual interest rate of 12 percent. The firm is required to maintain a 10 percent compensating balance on any funds borrowed under this agreement and to pay a 0.5 percent commitment fee on the unused portion of the credit line. Determine the annual financing cost to COCO Inc. of borrowing Php4 million. a. 13.3% b. 14.7% c. 14.2%

COCO Inc. has a credit agreement which is revolving fund with its bank under which it can borrow up to Php10 million at an annual interest rate of 12 percent. The firm is required to maintain a 10 percent compensating balance on any funds borrowed under this agreement and to pay a 0.5 percent commitment fee on the unused portion of the credit line. Determine the annual financing cost to COCO Inc. of borrowing Php4 million. a. 13.3% b. 14.7% c. 14.2%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 21P

See similar textbooks

Similar questions

BPI granted a 10-year loan to a borrower in the amount of ₱1,500,000 with stated interest rate of 6%. Payments are due monthly and are computed to be ₱16,650. The bank incurred ₱40,000 of direct loan origination cost and ₱20,000 of indirect loan origination cost. In addition, the bank charged the borrower a 4-point nonrefundable loan origination fee. What is the carrying amount of the loan receivable to be reported initially by the bank?
On January 1, 20x1, Next Co. obtains a P4,000,000 bank loan due on December 31, 20x4. Interest of 12% is due annually. The bank charges Next Co. an 11.19% nonrefundable loan origination fee. The effective interest rate on the loan is approximately equal to a. 11.19% b. 12% c . 16 % d. 17.37%
NOP Co. has agreed to the following loan proposal by a bank:▪ Stated interest rate of 10% on a one-year discounted note ▪ 15% of the loan as compensating balance with zero-interest current account to be maintained with the bank. ▪ The loan will have net proceeds of P1,500,000. Required:1. How much is the principal amount of the loan?
Jhar Industries has borrowed $125,000 under a line-of-credit agreement. While the company normally maintains a checking account balance of $15,000 in the lending bank, this credit line requires a 20% compensating balance. The stated interest rate on the borrowed funds is 10%. Show Solutions and Explanation. A. What is the effective annual rate of interest on the line of credit? (Format: 11.11%)
Jackson Industries has borrowed $125,000 under a line-of-credit agreement. While the company normally maintains a checking account balance of $15,000 in the lending bank, this credit line requires a 20% compensating balance. The stated interest rate on the borrowed funds is 10%. 1.What is the effective annual rate of interest on the line of credit? Format: 11.11%
Mr samuel approached the arnett national bank for a 15,000 loan to purchase vehicle the bank charges interest at the rate of 18 percentage per annum for the duration of the loan the bank also charges the followin fees :BANK FEES 8 percent, stamp duty 0.1 percent,legal fees 7.5 percent, application fee 1 percent a 20 percent deposit of the amount of the loan must also be made if the loan is approved .Calculate: the total amount paid of the fees charged by bank
Your company has agreed to a $340 million fixed-commitment line of credit. The loan agreement calls for your company to pay 1.41 percent per quarter on any funds borrowed and maintain a 6 percent compensating balance on any funds borrowed at zero percent interest. What is the effective annual interest rate on this line of credit? Multiple Choice O O O O 6.13% 5.12% 5.76% 4.94% 5.94%
Bank M offers the following terms for a $10 million loan: interest rate: 8 percent for one year on funds borrowed fees: 0.5 percent of the unused balance for the unused term of the loan Bank N offers the following terms FOR A $10 million loan interest rate 6.6 percent for one year on fund borrowed fees: 2 percent origination fee a. Which terms are better if the firm intends to borrow the $10 million for the entire year? b. If the firm plans to use the funds for only three months, which terms are better?
Brothers Corporation borrows P70,000.00, annual interest rate of 19% is deducted in advance. What is the amount of proceeds the company will receive at the time of the loan and what is the effective interest rate choose the letter of the correct answera. P13,300.00 and 19%b. P26,700.00 and 19%c. P13,300 and 23.5%d. P23,300.00 and 19%e. P56,700.00 and 23.5%
A company received a 10-year $10 million loan commitment from a bank at a fixed rate of 6.50%. The up-front commitment fee is 30 basis points and the unused portion of the loan is charged 12 basis points. The bank borrows a total of $5 million at the beginning of the year and none thereafter. What is the net cost of borrowing the $5 million? b) Explain how a letter of credit is created in international trade and its conversion to a banker's acceptance (BA).
USE THE FOLLOWING INFORMATION FOR NOS. 19 AND 20. ROUND ALL AMOUNTS TO THE NEAREST PESO On July 1, 2020, Jason Corporation pledged P5,000,000 of its accounts receivable to Philippine Bank as security for a P2,000,000 loan. The term of the loan is for one year and discounted at 12%. The journal entry to record the loan proceeds will show a debit to A) Commission Expense 240,000 Discount on Notes Payable 240,000 C. Recourse Obligation 240,000 Factor Holdback 240,000 Last saved 江 %23 P Type here to search
15000 php was loaned from a bank. The choices below show four possible borrowing schemes that the bank offers to repay the loan. Which of the following is the best scheme that offers minimal interest charge? a. quarterly installement of 1,960.35 php for 2 years b. 1.5% interest rate compunded monthly, payable for 3 years c. semi-annual amortization equivalent to 3,844.22 php, payable for 24 months d. 05% interest rate compunded anually, payable after 5 years