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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 180-day maturity notes. The paper will carry a 10.00 percent rate with discounted interest and will cost Tri-State $14,000 (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? a. The effective cost of credit, or APR, to Tri-State is %. (Round to two decimal places.)
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