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Hiro Holdings is planning a minor 3-month expansion project and requires RM800,000 for the purpose. The following options are available to the company: Alternative 1
Hiro Holdings is planning a minor 3-month expansion project and requires RM800,000 for the purpose. The following options are available to the company: Alternative 1 To obtain a short-term loan from Annbank. The bank will charge 6 percent interest per year and an 8 percent compensating balance. Currently, the company has RM60,000 in its account. Alternative 2 To obtain a RM900,000 revolving credit from Maikank. The annual interest rate on the credit line has been set at 10 percent, and the commitment fee will be 0.5 percent. Alternative 3 Instead of borrowing, the company will issue commercial paper at a cost of RM1,200 per paper. The face value of the commercial paper is RM200,000 per paper, with an annual interest rate of 7 percent. 19. Calculate the commitment fee for obtaining a credit line from Maikank. Answer A. RM450,000 B. RM20,000 C. RM4,500 D. RM500
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