The Meyer Company must arrange financing for its working capital requirements for the coming year. Meyer can

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The Meyer Company must arrange financing for its working capital requirements for the coming year. Meyer can

(a) Borrow from its bank on a simple interest basis (interest payable at the end of the loan) for one year at a 12 percent simple rate

(b) Borrow on a three-month, renewable loan at an 11.5 percent simple rate

(c) Borrow on an installment loan basis at a 6.0 percent add-on rate with 12 end-of-month payments

(d) Obtain the needed funds by no longer taking discounts and thus increasing its accounts payable. Meyer buys on terms of 1/15, net 60. What is rEAR of the least expensive type of credit, assuming 360 days per year?

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Essentials of Managerial Finance

ISBN: 978-0324422702

14th edition

Authors: Scott Besley, Eugene F. Brigham

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