Calculate the effective annual cost of a one-year

Assignment Help Finance Basics
Reference no: EM13507179

1. ABC Inc. currently grants credit terms net 25. It is considering a new policy that involves a more stringent credit policy: net 20. As a result, the price of its product will stay the same at $45. The expected sales will decrease by 2,000 per year to 10,000 units. Variable costs will remain at $37 per unit and bad debt losses can be reduced by $1,000 per year to $2,000. ABC Inc. will finance the additional investment in receivables using its line of credit, which charges 6.5 percent interest after tax, and its tax rate is 40 percent. Should ABC Inc. switch to the new policy?

2.Calculate the effective annual cost of a one-year $1,000,000 operating line of credit. The firm borrowed 600,000 for the first 5 months of the year and reduced the loan amount to $500,000 for the rest of the year. The quoted interest rate is 7.5 percent and there is a 0.8 percent commitment fee on the unused portion.

Reference no: EM13507179

Questions Cloud

What is the net charge on the oil drop : An Oil droplet with a radius of 0.03 mm is observed to hover motionless in space between two vertically separated metal plates. What is the net charge on the oil drop
Explain equation for sodium iodide and sulfuric acid : Write a balance molecular equation for sodium iodide and sulfuric acid ( states of reactants and products must be shown)
Evaluate the risk-based approach to external audit : Critically evaluate the risk-based approach to external audit with particular reference to the audit of Home Retail Group plc.
Evaluate the interfacial tension between water and cnts : The contact angle between water and a carbon nanotube (CNT) bundle is 86.3o (J. Phys. Chem. B, 2006, 110, 15945). If the surface tension of CNTs is ~28mN/m, calculate the interfacial tension between water and CNTs.
Calculate the effective annual cost of a one-year : Calculate the effective annual cost of a one-year $1,000,000 operating line of credit. The firm borrowed 600,000 for the first 5 months of the year and reduced the loan amount to $500,000 for the rest of the year. The quoted interest rate is 7.5 perc..
Explain molecular equation for reaction of magnesium : Molecular equation for reaction of magnesium with air in the presence of heat ( states of reactants and products must be shown)
What is the work done on the raindrop by air resistance : A raindrop of mass 3.10 multiplied by 10-5 kg falls vertically at constant speed under the influence of gravity and air resistance. What is the work done on the raindrop by air resistance
What exactly is the predetermined overhead rate : Describe what manufacturing overhead and describe how it is different than direct labor and direct materials - give at least 3 examples of typical manufacturing overhead
Explain the determination of the normalization constant n : Show in detail the determination of the normalization constant N for a 3d orbital of a hydrogen atom whose wavefunction is Np^2e^(-p/2), where p is (2Z/na)r.

Reviews

Write a Review

Finance Basics Questions & Answers

  Exchange rate over time

In the year of 1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200. If the car still sold for same amount of yen today but the current exchange rate is 144 yen per dollar

  You believe you have suitable managerial skills to run

a few years ago a friend of yours started a small business that develops gaming software. the company is doing well and

  Discuss and interpret the financials in relation to the

decide upon an initiative you want to implement that would increase sales over the next five years.using the sample

  What is the current yield on the bonds

Martin Software has 10.6 percent coupon bonds on the market with 17 years to maturity. The bonds make semiannual payments and currently sell for 108.1 percent of par. What is the current yield on the bonds?

  It acquisition planning teams

Two IT acquisition planning teams worked together to study same problem and make alternative solutions for solving it. The teams then separated and each developed work breakdown structure for the same alternative solution.

  Find the interest paid during the first year

For tax purposes, she needs to know the amount of interest paid during each year of the loan. Find the interest paid during the first year.

  Ray seo has 5000 to invest in a small business venture his

ray seo has 5000 to invest in a small business venture. his partner has promised to pay him back 8200 in five years.

  Explain capital budgeting involves calculation present value

Explain Capital budgeting involves calculation of net present value and is considering the development of one of two mutually exclusive new computer models

  Calculate the required rate of return

Calculate the required rate of return on a company's stock that has the following characteristics

  The interest rate for the investment is 6 what will the

an investment is expected to pay a return of 100 per year. the interest rate for the investment is 6. what will the

  Calculate the payback period for the machine

Use the information in Problem 10 to do the following: a. Calculate the payback period for the machine. b. If the project's cost of capital is 10 percent, would you recommend buying the machine? c Estimate the IRR for the machine.

  Microsoft issued bonds for the first time in 2009 collect

microsoft issued bonds for the first time in 2009. collect information on its bonds what are the coupon rates are there

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd