Determine the annual financing cost of source of financing

Assignment Help Financial Management

Reference no: EM13927107

Harpo Music Mart needs to raise $300,000 to increase its working capital. The bank, mindful of Harpo's strained financial condition, has refused to loan the firm the needed funds. Harpo is considering stretching its accounts payable in order to raise the funds. Current credit terms are "3/10, net 30." Payments beyond the credit period are subject to a 1 percent per month penalty. Harpo purchases $125,000 per month from its suppliers and currently takes cash discounts. If Harpo is able to raise the $300,000 it needs by stretching its accounts payable, determine the annual financing cost of this source of financing. For this problem, assume that a year con- sists of twelve 30-day months.

Reference no: EM13927107

Questions Cloud

Flexible currency trading market in the world : The OTC Market has gradually evolved into the largest, fastest and most flexible currency trading market in the world.

The organization internal and customer data : ESL Inc. is a large company that has been using a series of spreadsheets, access databases, and manual records to keep track of the majority of the organization's internal and customer data.

Help of the systems theory : Select a system topic you are going to use throughout this course. In a paper, analyze your chosen system with the help of the systems theory in the following ways:

Calculate the customer support and distribution costs : Calculate the customer support and distribution costs associated with the three types of customers. Use a simple strategy first and allocate the costs based on revenues

Determine the annual financing cost of source of financing : If Harpo is able to raise the $300,000 it needs by stretching its accounts payable, determine the annual financing cost of this source of financing. For this problem, assume that a year con- sists of twelve 30-day months.

Complete the frequency table with relative frequency : The volume of milk in a jug of milk is 128 oz. The value 128 is from a discrete data set.

People in various areas of the operation : Ron Garcia felt good about his first week as a management trainee at Mexicana Wire Winding, Inc. He had not yet developed any technical knowledge about the manufacturing process, but he had toured the entire facility, located in the suburbs of Mex..

The senior vice president of human resources : The Senior Vice President of Human Resources has just informed you that she would like for you to research various HRM practices of Fortune 500 companies. This research will be presented to the board of trustees next month. They want to review oth..

Determine the annual financing cost of the loan : Determine the annual financing cost of the loan under each of the following conditions Kittanning currently maintains $100,000 in its account at the bank that can be used to meet the compensating balance requirement.

User Account

All Pages