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Analyze the cost of each of this alternatives

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Reference no: EM132766165

Question - The treasurer of lights a lot manufacturing company is faced with the 3 alternative bank loans. The firm wishes to select one that minimizes the cost of credit on a $200,000 note that it plans to issue in the next 10 days. Relevant information for the 3 loan configurations includes:

a. An 18% rate of interest with interest paid at year-end and noi compensating balance requirement.

b. An 16% rate of interest but carrying a 20% compensating balance requirement this loan also calls for interest to be paid at year-end.

c. An 14% rate of interest that is discounted plus a 20% compensating balance requirement.

Required - Analyze the cost of each of this alternatives. You may assume the firm would not normally maintain any bank balance that might be used to meet the 20% compensating balance requirements of alternatives b and c.

Reference no: EM132766165

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