Question

In: Finance

Paymaster Enterprises has arranged to finance its seasonal​ working-capital needs with a​ short-term bank loan. The...

Paymaster Enterprises has arranged to finance its seasonal​ working-capital needs with a​ short-term bank loan. The loan will carry a rate of

14 percent per annum with interest paid in advance​ (discounted). In​ addition, Paymaster must maintain a minimum demand deposit with the bank of 11 percent of the loan balance throughout the term of the loan. If Paymaster plans to borrow $120,000 for a period of 6 ​months, what is the annualized cost of the bank​ loan?

The annualized cost of the bank loan is ______%.

​(Round to two decimal​ places.)

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 month ago
Next > < Previous

Related Solutions

Paymaster Enterprises has arranged to finance its seasonal​ working-capital needs with a​ short-term bank loan. The...
Paymaster Enterprises has arranged to finance its seasonal​ working-capital needs with a​ short-term bank loan. The loan will carry a rate of 12 percent per annum with interest paid in advance​ (discounted). In​ addition, Paymaster must maintain a minimum demand deposit with the bank of 10 percent of the loan balance throughout the term of the loan. If Paymaster plans to borrow ​$110,000 for a period of 5 ​months, what is the annualized cost of the bank​ loan?
​(Cost of​ short-term bank loan​) On July​ 1, 2015, the Southwest Forging Corporation arranged for a...
​(Cost of​ short-term bank loan​) On July​ 1, 2015, the Southwest Forging Corporation arranged for a line of credit with the First National Bank​ (FNB) of Dallas. The terms of the agreement call for a $140,000 maximum loan with interest set at 1 percent over prime. In​ addition, the firm has to maintain a 19 percent compensating balance in its demand deposit account throughout the year. The prime rate is currently 14 percent. Note​: Interest is not paid in advance​...
(Cost of​ short-term bank loan​) On July​ 1, 2015, the Southwest Forging Corporation arranged for a...
(Cost of​ short-term bank loan​) On July​ 1, 2015, the Southwest Forging Corporation arranged for a line of credit with the First National Bank​ (FNB) of Dallas. The terms of the agreement call for a ​$120,000 maximum loan with interest set at 2 percent over prime. In​ addition, the firm has to maintain a 19 percent compensating balance in its demand deposit account throughout the year. The prime rate is currently 12 percent. Note​: Interest is not paid in advance​...
(Cost of short-term bank loan) On July 1, 2015, the Southwest Forging Corporation arranged for a...
(Cost of short-term bank loan) On July 1, 2015, the Southwest Forging Corporation arranged for a line of credit with the First National Bank (FNB) of Dallas. The terms of the agreement call for a $100,000 maximum loan with interest set at 1 percent over prime. In addition, the firm has to maintain a 20 percent compensating balance in its demand deposit account throughout the year. The prime rate is currently 4.5 percent. If Southwest normally maintains a $20,000 to...
​(Cost of​ short-term bank loan​) On July​ 1, 2015, the Southwest Forging Corporation arranged for a...
​(Cost of​ short-term bank loan​) On July​ 1, 2015, the Southwest Forging Corporation arranged for a line of credit with the First National Bank​ (FNB) of Dallas. The terms of the agreement call for a ​$110 comma 000 maximum loan with interest set at 2 percent over prime. In​ addition, the firm has to maintain a 20 percent compensating balance in its demand deposit account throughout the year. The prime rate is currently 12 percent. Note​: Interest is not paid...
firm has applied for working capital finance from a commercial bank. Estimate the working capital requirements....
firm has applied for working capital finance from a commercial bank. Estimate the working capital requirements. You can add 10% to estimated figures for exigencies. Sales - 2,247,000 CoGS - 1,637,100 GP - 609,900 Admin expenses - 149,800 Selling exp - 139,100 Profit before tax - 321,000 Tax provision - 107,000 PAT - 214,000 COGS Material used - 898,800 Wages and other manf. Exp - 668,750 Depreciation - 251,450 Less: stock and finished goods (10% product not yet sold) -...
Lois Company Ltd is a fast-growing Ghanaian Multinational Company looking for short term working capital loan...
Lois Company Ltd is a fast-growing Ghanaian Multinational Company looking for short term working capital loan to support its expansion to other West African Countries. You have just been hired as a Senior Financial Analyst to help the firm secure a cheap source of funding to achieve its objective. The CEO of this company is concerned about the high interest rates in Ghana and has asked you to borrow in Dollars since USD interest rates have become cheaper since the...
AVER Ltd is considering short term financing for its working capital requirement. You are invited to...
AVER Ltd is considering short term financing for its working capital requirement. You are invited to provide a discussion on the risk-return trade-off that the company should consider in selecting different sources of short term financing. In your discussion, illustrate with an appropriate example where possible. Write between 1,200 – 1,400 words for this question.
) Reuth  Corporation plans to raise $2 million to pay off its existing short-term bank loan of...
) Reuth  Corporation plans to raise $2 million to pay off its existing short-term bank loan of $600,000 and to increase total assets by $1,400,000.  The bank loan bears an interest rate of 10 percent. The company's president owns 51.5% percent of the 4,000,000 shares of common stock and wishes to maintain control of the company. The company's tax rate is 20 percent.  Balance sheet information is shown below.   The company is considering two alternatives to raise the $2 million: (1) sell common...
A company needs to borrow $10 million for its working capital needs. Its considering the following...
A company needs to borrow $10 million for its working capital needs. Its considering the following three alternatives: Forgo cash discounts granted with the credit terms of 3/10; net 30 Borrow from the bank at 15% requiring a compensating balances 12% Issue commercial paper with 180 day maturity, at 12%. Cost of placement will $100,000. Which alternative would be the best?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT