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Macco Bakers requires $500,000 in financing for a 90-day period. Three alternatives are being considered. a. Establish a line of credit with the bank at
Macco Bakers requires $500,000 in financing for a 90-day period. Three alternatives are being considered. a. Establish a line of credit with the bank at en interest rate of 8 percent. The bank will charge a fee of $5,000 to establish the line of credit Forgo trade discounts from suppliers on terms of 2/10, net 100, c. Issue commercial paper for 90 days at a discount of 2,05 percent. a. What would be the rate of interest for bank loan? (Use 365 days in a year. Do not round Intermediate calculations. Round the final answer to 2 decimal places.) Rate of interest for bank loan 1% b. What would be the cost of forgoing the cash discount? (Use 365 days in a year. Do not round Intermediate calculations. R the final answer to 2 decimal places.) Cost of forgoing the cash discount c. What would be the price of commercial paper? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Discounted commercial paper Round d. Which alternative should be selected? Dante non d. Which alternative should be selected? Bank loan Cost of forgoing discount Commerical paper
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