Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan
Question:
Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan will carry a rate of 8 percent per annum with interest paid in advance (discounted). In addition, Paymaster must maintain a minimum demand deposit with the bank of 10 percent of the loan balance throughout the term of the loan. If Paymaster plans to borrow $1 million for a period of 6 months, what is the cost of the bank loan?
Step by Step Answer:
ESTIMATING THE COST OF BANK CREDIT ...View the full answer
Foundations Of Finance
ISBN: 9780134083285
9th Edition
Authors: Arthur J. Keown, John H. Martin, J. William Petty
Related Video
Interest, debt, finance, and capital markets are all important concepts in the world of economics and business. Interest is the cost of borrowing money, and it is typically expressed as a percentage of the amount borrowed. Debt is the money that is borrowed, and it has to be repaid with interest. Finance is the study of how individuals, companies, and organizations manage their money and investments. Capital markets are the places where companies and governments can raise money by selling stocks and bonds to investors. These markets play an important role in the overall economy by helping to fund investment and growth.
Students also viewed these Finance questions
-
Paymaster Enterprises has arranged to finance its seasonal working- capital needs with a short- term bank loan. The loan will carry a rate of 12 percent per an-num with interest paid in advance...
-
A bond with a coupon rate of 8 percent sells at a yield to maturity of 9 percent. If the bond matures in 17 years, what is the Macaulay duration of the bond? What is the modified duration?
-
A $1,000 bond has a coupon rate of 8 percent and matures after ten years. a) What is the current price of the bond if the comparable rate of interest is 8 percent? b) What is the current price of the...
-
A 4-ft-high, 3-ft-diameter cylindrical water tank whose top is open to the atmosphere is initially filled with water. Now the discharge plug near the bottom of the tank is pulled out, and a water jet...
-
Can you do capital budgeting for a foreign project using a domestic currency discount rate? Explain your answer.
-
Why is there a need for a new consideration such as through APT?
-
8. RULEMAKING Agencies may promulgate legislative rules, which generally have the effect of statutes, or interpretive rules, which merely interpret existing statutes. (p. 91)
-
1. Describe the situation at Lehman Brothers from an ethics perspective. Whats your opinion of what happened here? 2. What was the culture at Lehman Brothers like? How did this culture contribute to...
-
Required information [The following information applies to the questions displayed below.] On January 1, Year 1, a company issues $390,000 of 7% bonds, due in 10 years, with interest payable...
-
Using the information provided in Part 1 of Problem 1 A, journalize each of the transactions assuming a periodic inventory system. In Problem Part 1 Prepare General Journal entries to record the...
-
The Michelin Warehousing and Transportation Company (WTC) needs $300,000 to finance an anticipated expansion in receivables due to increased sales. WTC's credit terms are net 60, and its average...
-
The Marlow Sales and Distribution Co. needs $1.5 million for the 3-month period ending September 30, 2015. The firm has explored two possible sources of credit. a. Marlow has arranged with its bank...
-
The main cables of a suspension bridge [see part (a) of the figure] follow a curve that is nearly parabolic because the primary load on the cables is the weight of the bridge deck, which is uniform...
-
Compare and contrast the insurance plan for one developed country (Canada) to that of a developing country (India). What is it? Who is covered with the insurance plan? What kinds of cost are...
-
A bank manager wants to compute probabilities that incoming customers open savings account, checking account or both. She already found out that the probability that a customer opens checking account...
-
When would it be better to have a checking account with no per-check fee and a monthly fee, rather than a checking account that is cost-per-check?
-
Dengo Company makes a trail mix in two departments: Roasting and Blending Direct materials are added at the beginning of each process, and conversion costs are added evenly throughout each process....
-
Evaluate each limit. 5 3. lim (x-9) X 5. lim- 12x-2 7. lim X--1' x-2x+1 x+1 x+1 4. lim- rx-1 6. lim x-1 + x +4x-16 8. lim
-
1. Why would a political or business organization choose to pursue astroturfing? 2. If these astroturf organizations are funded by such large companies, why dont those companies just spend their...
-
Experiment: Tossing four coins Event: Getting three heads Identify the sample space of the probability experiment and determine the number of outcomes in the event. Draw a tree diagram when...
-
Based on the information for the T. P. Jarmon Company for the year ended December 31, 2015 (see page 96): a. How much is the firm's net working capital, and what is the debt ratio? b. Complete a...
-
Prepare an income statement and a balance sheet from the following scrambled list of items. What is the firm's net working capital and debt ratio? Sales...
-
What are the limitations of financial statements?
-
4. What was the name of the dance on Huey's tv show? O gator dance O gator swing O gator tap O gator kick
-
5) Choose the scenario below that would give rise to Foreign Base Company Sales Income? a) U.S. corporation purchases property produced in the United States from a related U.S. corporation and sells...
-
Chapter 15 Examine the reason for the four primary categories of control devices and then discuss the common building systems controlled by building automation? How does this relate to the control...
Study smarter with the SolutionInn App