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You recently approached your bank about a credit line. The terms offered to you include a rate of prime plus 1 percent on the amount borrowed. Prime is currently 3.25%. There is also a commitment fee of 20 basis points on the unused portion of the credit line and a compensating balance of 15% on the amount borrowed.
You decide to establish the line of credit for $40 million. Currently, your company does not hold balances in their accounts at the bank and pays fees for all cash management services.
A. Estimate the yearly cost of the credit line if the average monthly amount used is $30 million.
B. If your company chose to start keeping the compensating balance at the bank, estimate the effective cost of the credit line.
Assuming that sales growth is expected to be 20% this year, calculate the AFN.
Assume Brown-Murphies faces a flotation cost of 10 percent on new equity issues.
Singular Corp. Has the following income statement data: 2006 2007 Sales $500,000 $700,000 Gross Profit 161,300 205,000 Selling and administrative expense 45,200 74,300 Interest expense 15,200 29,100 Net income (after these and other expenses) 44,1..
How much money do you need to put in a money market fund today earning a nominal 6% a year to fund your literature expenses a) forever and b) for the next 6 years?
The stated interest rate on the borrowed funds is 10%. What is the effective annual rate of interest on the line of credit?
Assuming that AirJet Parts, Inc. is considering loans from National First and Regions Best, what are the EARs for these two banks? Select "Interest Rates" and then "Prime Bank Loan Rate". Use the latest MPRIME. Show your calculations.
Differentiate between a foreign transaction and a foreign currency transaction. Please give an example of each.
Find the NPV and PI of an annuity that pays $500 per year for eight years and costs $2500. assume a discount rate of 6 %.
A permanent working capital investment of $60,000 is expected to produce an annual after-tax cash inflow of $18,000 for many years and has a cost of capital of 12%. Calculate the net annual benefit of the proposed permanent working capital investm..
When the cost of an investment come before that investment's benefits, what will be the effect of a rise in interest rates on the attractiveness of that investment to potential investors?
If demand falls to 86,900 units and the company wants to continue to earn a 0.40 return, what price should the company charge?
After that, the company has stated that the annual dividend will be $1.25 per share indefinitely. What is this stock worth to you per share if you demand a 10.8 percent rate of return on stocks of this type?
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