What is the annual rate on the bank loan

Assignment Help Business Management
Reference no: EM133055931

Kentville Petroleum needs $1,000,000 to take advantage of a cash discount of 2/20, net 60. A banker will loan the money for 40 days at a total interest cost of $10,959

a) What is the annual rate on the bank loan?

b) How much would it cost (in percentage terms) if Kentville did not take the cash discount and paid the bill in 60 days instead of 20 days?

c) Should Kentville borrow the money to take the discount?

d) If the Banker requires a 20 percent compensating balance, how much must Kentville borrow to end up with the $1,000,000 cash available?

e) If Kentville could borrow from another bank at an annual rate of 10%, but they required a 20% compensating balance, what would be the effective annual interest rate on the loan?

Reference no: EM133055931

Questions Cloud

Explain the camels and the camels rating system : Explain each the CAMELS and the CAMELS Rating System and its importance in Philippine Banking System.
What is the five-year nominal interest rate : Suppose you know the real five-year real interest rate is 2.5%. You also know that investors expect inflation over the next five years to average 3%.
Selected principle to ethical research : State the principle and describe the importance of the selected principle to ethical research.
What is the budgeted cost of merchandise purchases : The store expects to begin May with $44,000 of inventory. What is the budgeted cost of merchandise purchases for May
What is the annual rate on the bank loan : Kentville Petroleum needs $1,000,000 to take advantage of a cash discount of 2/20, net 60. A banker will loan the money for 40 days at a total interest cost of
Focus on transformational leadership and knowledge : This journal articles focus on transformational leadership and knowledge and knowledge sharing within an organization,
Estimate the value of equity for kfc beef : KFC Beef, a fast-food company selling roasted beef in outlets through the country, went public in 1993. In the year prior to going public, it had revenues of $4
Find the project NPV using a discount rate : Thus, in year 9 the investment cash inflow totals $4,400,000. Find the project's NPV using a discount rate of 8 percent
Find price of bonds-pybus inc : Pybus, Inc. is considering issuing bonds that will mature in 24 years with an annual coupon rate of 6 percent. Their par value will be ?$1,000?, and the interes

Reviews

Write a Review

Business Management Questions & Answers

  What are issues involved in translating theory into practice

What are the issues involved in translating theory into practice? Be sure to keep in mind the various conceptions of theory you discussed in Question 1.

  Suppose that fast food is an inferior good

Suppose that fast food is an inferior good. Suppose further that all fast food workers earn the minimum wage.

  Creation of fema that can provide guidance

As you contemplate how to restructure DHS, are there any lessons learned from the creation of FEMA that can provide guidance on how to restructure DHS?

  Explain five uses of national income statistics

1. Explain five uses of national income statistics to an economy

  Some of the disadvantages or limitations of the evaluation

What are some of the disadvantages or limitations of the evaluation you selected ? What information would you need to gather to perform your evaluation?

  Hr consulting team providing human resource management

Assume that you are a member of an HR consulting team providing human resource management (HRM) consultation for a new small business.

  What you learned about the stance of a case study research

What documents could you have used, instead of or in addition to the ones you used? - How might the sampling method you used influence the results?

  Subprime auto loans: contracts with the desperate

You may have seen the ads. "Need cash? No credit history needed. Approval within hours." You may wonder how the lenders do it. How do they make money when they

  What are the three important questions of corporate finance

You are the new CFO of Risk Surfing Ltd, which has current assets of $7,920, net fixed assets of $17,700, current liabilities of $4,580 and long-term debts of $

  Different pieces of information

The following are three different pieces of information that are relevant in your workplace:

  Different kinds of unified communication platforms

What are the comparison of the different kinds of unified communication platforms, their features and functionality, based on the five criteria.

  Philosophy about advertising by beginning to advertise in us

Did Anita Roddick betray her philosophy about advertising by beginning to advertise in U.S. markets? Did this decision have ethical implications?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd