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3-7. (Calculating the cost of trade credit) (Related to Checkpoint 18.2 on page 621) Your business has an estimated working capital requirement ranging from 45,000
3-7. (Calculating the cost of trade credit) (Related to Checkpoint 18.2 on page 621) Your business has an estimated working capital requirement ranging from 45,000 to 75,000. You are planning to obtain short-term working capital finance for 180 days. You have contacted a few banks and they have made following offers (assuming a 365-day calculation basis): a. A short-term loan of 75,000, which is repayable in 180 days based on annual interest payment of 12 percent. b. An overdraft limit of 100,000 for a 12 -month period at a rate of 10 percent, but with an upfront fee of 500. Which of the above options should you choose considering you need to minimize your cost of finance
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