1.

In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following:

1. Pay 1.92 percent per quarter on any funds actually borrowed.

2. Maintain a 1 percent compensating balance on any funds actually borrowed.

3. Pay an up-front commitment fee of 0.27 percent of the amount of the line.

Required: Based on this information, answer the following:

(a) Ignoring the commitment fee, what is the effective annual interest rate on this line of credit? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

(b) Suppose your firm immediately uses $222 million of the line and pays it off in one year. What is the effective annual interest rate on this $222 million loan? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

2.

You?ve worked out a line of credit arrangement that allows you to borrow up to $60 million at any time. The interest rate is .578 percent per month. In addition, 4 percent of the amount that you borrow must be deposited in a noninterest-bearing account. Assume that your bank uses compound interest on its line-of-credit loans.

Required:

(a) What is the effective annual interest rate on this lending arrangement? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

(b) Suppose you need $19.2 million today and you repay it in six months. How much interest will you pay? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimal places (e.g., 32.16).)

3.

Consider the following financial statement information for the Amaryliss Corporation:

Item Beginning Ending

Inventory $10,682 $11,480

Accounts receivable 5,951 6,481

Accounts payable 6,252 6,593

Net sales $139,603

Cost of goods sold 87,413

Required: Assume all sales are on credit. Calculate the operating and cash cycles. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

Operating cycle ? days

Cash cycle ?days

4.

The Bass Company has projected the following quarterly sales amounts for the coming year:

Q1 Q2 Q3 Q4

Sales $540 $570 $630 $780

a?Accounts receivable at the beginning of the year are $300. Bass has a 60-day collection period. Calculate cash collections in each of the four quarters by completing the following (Do not round intermediate calculations. Round your answers to the nearest dollaramount (e.g., 32)):

Q1 Q2 Q3 Q4

Beginning receivables $ $ $ $

Sales 540 570 630 780

Cash collections

Ending receivables $ $ $ $

b) Accounts receivable at the beginning of the year are $300. Bass has a 30-day collection period. Calculate cash collections in each of the four quarters by completing the following (Do not round intermediate calculations. Round your answers to the nearest dollaramount (e.g., 32)):

Q1 Q2 Q3 Q4

Beginning receivables $ $ $ $

Sales 540 570 630 780

Cash collections

Ending receivables $ $ $ $

1. 2. In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 1.92 percent per quarter on any funds actually borrowed. 2. Maintain a 1 percent compensating balance on any funds actually borrowed. 3. Pay an up-front commitment fee of 0.27 percent of the amount of the line. Required: Based on this information, answer the following: (a) Ignoring the commitment fee, what is the effective annual interest rate on this line of credit? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) (b) Suppose your firm immediately uses $222 million of the line and pays it off in one year. What is the effective annual interest rate on this $222 million loan? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) 3. You've worked out a line of credit arrangement that allows you to borrow up to $60 million at any time. The interest rate is .578 percent per month. In addition, 4 percent of the amount that you borrow must be deposited in a noninterest-bearing account. Assume that your bank uses compound interest on its line-of-credit loans. Required: (a) What is the effective annual interest rate on this lending arrangement? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) (b) Suppose you need $19.2 million today and you repay it in six months. How much interest will you pay? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimal places (e.g., 32.16).) 4