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(Cost of commercial paper) Tri-State Enterprises plans to issue commercial paper for the first time in the firm's 35-year history. The firm plans to issue
(Cost of commercial paper) Tri-State Enterprises plans to issue commercial paper for the first time in the firm's 35-year history. The firm plans to issue $500,000 in 270-day maturity notes. The paper will carry a 10.25 percent rate with discounted interest and will cost Tri-State $10,000 (paid in advance) to issue. Note:'Assume a 30-day month and 360-day year.
A. What is the effective cost of credit to tri state?
b. What other factors should the company consider in analyzing whether to issue the commercial paper?
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