Your company is considering three options for financing its short term operations i. Borrow Tk.25 million from Shuktara Bank at 15 percent interest rate and a 20 percent compensating balance requirement signing a 60 day promissory note. ii. Borrow Tk.25 million from Chandramukhi Bank at 15 percent discount interest. ii. Forego discount on a trade credit on terms 3/10, net 50. Strictly based on effective cost, which option would you select and why?
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- Your company is considering three options for financing its short term operations Borrow Tk.20 million from Shuktara Bank at 12 percent interest rate and a 15 percent compensating balance requirement signing a 60 day promissory note. Borrow Tk.20 million from Chandramukhi Bank at 12 percent discount interest. Forego discount on a trade credit on terms 2/15, net 45. Strictly based on effective cost, which option would you select and why?2. A car financing firm offers the following scheme for an entry level Isuzu Mu-X 2021 model: • Selling Price Down Payment Method P1,350,000 25% Payment Term 36 months Monthly Payment P39,639 What nominal rate is applied and what is the effective rate?Consider a loan repayment plan described by the following initial value problem, where the amount borrowed is B(0) = $40,000, the monthly payments are $600, and B(t) is the unpaid balance of the loan. Use the initial value problem to answer parts a through c. B' (+) =0.03B - 600, B(0) = 40,000 a) Find the solution of the initial value problem and explain why B is an increasing solution. B(t) = Why is B an increasing function? O A. The function is increasing because it is an exponential function with a positive coefficient and a negative exponent. O B. The function is increasing because it is an exponential function with a positive coefficient and a positive exponent. O C. The function is increasing because it is an exponential function with a positive exponent. O D. The function is increasing because it is an exponential function with a positive coefficient. b) What is the most that you can borrow under the terms of this loan without going further into debt each month? The…
- 3.-DO IT IN EXCEL, AND SHOW THE FORMULASThe main supplier of Productos Adiós, S.A., offers you the option of a Cash Discount of 1.5% if you pay before two weeks. You should seriously evaluate this alternative to try to be more efficient in your accounts payable. You can use the direct lending facility that charges interest in advance, at a rate of 14.5% and an origination fee of 1%.This supplier's billing is $450,000 for a one-month term.What is the difference between the supplier's discount and the sum of commission and interest on the financing? A) $476.39 B) None of the above C) $660.87 D) $2,904.26 (Choose one option)3.-DO IT IN EXCEL, AND SHOW THE FORMULASThe main supplier of Productos Adiós, S.A., offers you the option of a Cash Discount of 1.5% if you pay before two weeks. You should seriously evaluate this alternative to try to be more efficient in your accounts payable. You can use the direct lending facility that charges interest in advance, at a rate of 14.5% and an origination fee of 1%.This supplier's billing is $450,000 for a one-month term.What is the difference between the supplier's discount and the sum of commission and interest on the financing? A) $476.39 B) None of the above C) $660.87 D) $2,904.26Set Corporation is deciding which of two banks to borrow from on a 1-year basis. Bank A charges an 18 percent interest rate payable at maturity. Bank B charges a 17 percent interest rate on a discount basis. Which loan is cheaper and its effective interest rate? choose the letter of the correct answera. Bank A with 18%b. Bank B with 18%c. Bank A with 20.5%d. Bank B with 20.5%e. Both banks with 20.5%
- Find the annual financing cost of a 45 day revolving credit agreement with a 0.5% commitment fee. Assume you borrow $377,863m at 5.96%. You can borrow up to $500,000. b.Find the annual financing cost (AFC) or a 30 day line of credit where the bank requires a 10% compensating balance requirement. Assume you borrow $211,895m at 5.39% and you have $20,000 in the bank.Problem D: Effective cost of Short‐term Loan:ABC would need cash of P5,000,000. Several banks offered different loan conditions. One of the loans has a term of 6 months,interest of 5%, and compensating balance of P50,000Required:1. How much should the face value of the loan be?2. How much is the simple effective annual interest?Problem E: Effective cost of Short‐term Loan: ABC will be acquiring a P4,000,000 loan from XYZ Bank. 13. The detail are 6‐month term, 3% interest, P40,000 bank chargeand P50,000 compensating balance.Required:1. How much is the compound effective annual interest?Problem E: Effective cost of Short‐term Loan:ABC will be acquiring a P4,000,000 loan from XYZ Bank. 13. The detail are 6‐month term, 3% interest, P40,000 bank chargeand P50,000 compensating balance.Required:1. How much is the compound effective annual interest?
- a. What interest rate would make it worthwhile to incur a compensating balance of $15,500 in order to get a 0.65-percent lower interest rate on a 2-year, pure discount loan of $230,000? b. Is it worth incurring the compensating balance to obtain the lower rate? Complete this question by entering your answers in the tabs below. Required A Required B What interest rate would make it worthwhile to incur a compensating balance of $7,500 in order to get a 0.65-percent lower interest rate on a 2-year, pure discount loan of $150,000? Note: Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. Interest rate %JENNY Company has been granted credit terms of 2/10, net 30 by the supplier. JENNI operates 360 days a year.Required: 1. Compute the nominal annual cost of credit or the cost of forgoing the cash discount 2. If the prevailing nominal interest rate of commercial bank on loan is 10% per annum will it be favorable for JENNY not to pay within the discount period and use the money as the source of financing? Discuss your answer briefly. 3. Compute the effective annual rate of trader's credit.with soluProblem D: Effective cost of Short‐term Loan:ABC would need cash of P5,000,000. Several banks offered different loan conditions. One of the loans has a term of 6 months,interest of 5%, and compensating balance of P50,000Required:11. How much should the face value of the loan be?12. How much is the simple effective annual interest?