Determine the annual financing cost

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Reference no: EM131336608

The Clearfield Company would be permitted to borrow up to $750,000 secured by inventories under a field warehouse arrangement with a sales finance company. The annual interest rate would be 12 percent.

The additional cost of establishing a field warehouse would be $35,000 per year. Determine the annual financing cost to Clearfield under this arrangement if Clearfield borrows
a. $750,000

b. $500,000

Reference no: EM131336608

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