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Question - The treasurer of the Tin Mfg. Company is faced with three alternative bank loans. The firm wishes to select the one that minimizes the cost of credit on a P200,000 note that it plans to issue in the next 10 days. Relevant information for the here loan configuration is found below:
1. An 18% rate of interest with interest paid at year-end and no compensating balance requirement.
2. A 16% rate of interest but carrying a 20% compensating balance requirement. This loan also calls for interest to be paid at year-end.
3. A 14% rate of interest that is discounted plus a 20% compensating balance requirement.
Required - Analyze the cost of each of these alternatives. You may assume that the firm would not normally maintain any bank balance that might be used to meet the compensating balance requirement of alternatives (b) and (c). Support your recommendation with supporting computations.
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.
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Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.
Simple Interest, Compound interest, discount rate, force of interest, AV, PV
CAPM and Venture Capital
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