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Cost of commercial paper Commercial paper is usually sold at a discount. Fan Corporation has just sod an issue of 130-day commercial paper with a face value of $0.6 million. The firm has received initial proceeds of $593, 468.
a. What effective annual rate will the firm pay for financing with commercial paper, assuming that it is rolled over every 130 days throughout the year?
b. la brokerage fee of $5, 487 was paid from the initial proceeds to an investment banker for selling the issue, what effective annual rata will the firm pay, assuming that the paper is rolled over every 130 days throughout the year?
a. The effective annual rate the firm will pay for financing with commercial paper, assuming that it is rolled over every 130 days throughout the year is %. (Round to two decimal places.)
The firm uses the CAPM to estimate the cost of equity, and it does not expect to issue any new common stock.
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You will document your understanding and learning relative to the course requirements as summarized in the course description. This must include how you will or could use the learning in your personal and/or professional decision making.
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