The EPG Manufacturing Company uses commercial paper regularly to support its needs for short-term financing. The firm

Question:

The EPG Manufacturing Company uses commercial paper regularly to support its needs for short-term financing. The firm plans to sell $100 million in 270-day-maturity paper, on which it expects to pay discounted interest at a rate of 12 percent per annum ($9 million). In addition, EPG expects to incur a cost of approximately $100,000 in dealer placement fees and other expenses of issuing the paper. What is the effective cost of credit to EPG?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Foundations Of Finance

ISBN: 9781292155135

9th Global Edition

Authors: Arthur J. Keown, John D. Martin, J. William Petty

Question Posted: