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A bank offers your firm a revolving credit arrangement for up to $60 million at an interest rate of 1.52 percent per quarter. The bank also requires you to maintain a compensating balance of 6 percent against the unused portion of the credit line, to be deposited in a noninterest-bearing account. Assume you have a shortterm
investment account at the bank that pays 0.75 percent per quarter, and assume that the bank uses compound interest on its revolving credit loans.
a. What is your effective annual interest rate (an opportunity cost) on the revolving credit arrangement if your firm does not use it during the year?
b. What is your effective annual interest rate on the lending arrangement if you borrow $40 million immediately and repay it in one year?
c. What is your effective annual interest rate if you borrow $60 million immediately and repay it in one year?
If 8000 units were in starting inventory, 24,000 units per started and 6,000 units were in the ending inventory how many units were finished and transferred out ?
You received an email from Carl operations manager for the California Container division. They produce packaging for cell phones. Carl understands that his product is an important cash producer for firm.
The controller of Dugan corporations has collected the following monthly expense information for use in analyzing the cost behavior of maintenance costs.
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In international cash management, managers have choice between managing only foreign exchange risk or managing foreign exchange and interest rate risk together.
Assume the public debt of the United States consisted of following types of security issues [all figures in billions of dollars]: Calculate total marketable and nonmarketable debt
Treasury securities that mature in six years currently have an interest rate of 8.5%. Find out the real risk free rate of interest?
Suppose that you are the manager of a professional soccer team and that you are negotiating a agreement with your team's star player. You can afford to pay the player only 1.5 million a year over three years
Describe Capital budgeting decision based on net present value and Should the new machine be purchased
In 250 to 350 words, describe foreign exchange risk and provide an example that examines how foreign exchange rates could cause a loss to the firm.
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