The Chalfant Company is considering the use of commercial paper to finance a seasonal need for funds.
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The Chalfant Company is considering the use of commercial paper to finance a seasonal need for funds. A commercial paper dealer will sell a $25 million issue maturing in 91 days at an annual interest rate of 8.5 percent (deducted in advance). The fee to the dealer for selling the issue is $75,000. Determine Chalfant’s annual financing cost of this commercial paper issue.
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