Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please answer alternative 2 and remaining questions Inca Breweries of Peru. Inca Breweries of Lima, Peru, has received an order for 10,000 cartons of beer

please answer alternative 2 and remaining questions

image text in transcribedimage text in transcribed

Inca Breweries of Peru. Inca Breweries of Lima, Peru, has received an order for 10,000 cartons of beer from Alicante Importers of Alicante, Spain. The beer will be exported to Spain under the terms of a letter of credit issued by a Madrid bank on behalf of Alicante Importers. The letter of credit specifies that the face value of the shipment, US$732,000, will be paid 150 days after the Madrid bank accepts a draft drawn by Inca Breweries in accordance with the terms of the letter of credit. The current discount rate on a 5-month bankers' acceptance is 8.2% per annum, and Inca Breweries estimates its weighted average cost of capital to be 19.1% per annum. The commission for selling a bankers' acceptance in the discount market is 1.2% of the face amount. How much cash will Inca Breweries receive from the sale if it holds the acceptance until maturity? Do you recommend that Inca Breweries hold the acceptance until maturity or discount it at once in the U.S. bankers' acceptance market? (NOTE: Assume a 360-day year.) Inca Breweries of Peru. Inca Breweries of Lima, Peru, has received an order for 10,000 cartons of beer from Alicante Importers of Alicante, Spain. The beer will be exported to How much cash will Inca Breweries receive from the sale if it holds the acceptance until maturity? Alternative 1: If Inca Breweries holds the draft for 150 days after the bank accepts it, Inca Breweries will receive the face amount of $732,000. The present value of $732,000 received 150 days hence, discounted at Inca's WACC is $ 678039.37. (Round to the nearest cent.) Alternative 2: Inca Breweries can sell the bankers' acceptance in today's money market at a(n) 8.2% per annum discount. The discount on the sale of acceptance is $ 25010. (Round to the nearest cent.) Calculate the amount received now below: (Round to the nearest cent.) Alternative 2 Face amount of invoice Less commission $ Less bankers' acceptance discount for period (150 days) $ Amount received now $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals of Investment Management

Authors: Geoffrey Hirt, Stanley Block

10th edition

0078034620, 978-0078034626

More Books

Students also viewed these Finance questions