YOUR company needs external financing. As VP for Finance, you approach three banks for a P5,000,000...

YOUR company needs external financing. As VP for Finance, you approach three banks for a P5,000,000 loan for three years . All three banks quoted a rate of 12 percent per annum, payable in equal monthly installments. The interest calculations are as follows:

 Bank X – flat basis

 Bank Y – annual rest basis

 Bank Z – reducing balance basis

Compute the Effective Annual Rate for the three banks.

Show your computations.

As borrower, which bank would you choose? Explain.

Expert Solution

jeff jeffy answered 3 years ago

XYZ company needs external financing. As VP for Finance, you approach three banks for a three-year...

XYZ company needs external financing. As VP for Finance, you approach three banks for a three-year $5,000,000 loan. All three banks quoted a rate of 12 % per annum, payable in equal monthly instalments. The interest calculations are as follows: Bank A – flat basis Bank B – annual rest basis Bank Z – reducing balance basis Requirements: - Compute the Effective Annual Rate for the three banks. Show your computations. - As a borrower, which bank would you choose?...

You are estimating your company’s external financing needs for the next year. Your first-pass pro forma...

You are estimating your company’s external financing needs for the next year. Your first-pass pro forma financial statements showed a large financing deficit for next year. How do you think reducing the collection period will change to your company’s operating plan would reduce the financing deficit if incorporated in revised pro forma financial statements?

xternal Financing We examined two important topics in finance during this unit: external financing requirements and...

xternal Financing We examined two important topics in finance during this unit: external financing requirements and agency conflicts. Address the prompts below in your essay. Include an introduction that summarizes the main points with an example. Critically reflect on the importance of external financing requirements. What key factors must be considered when determining external financing requirements? Briefly describe the types of agency conflict, and provide an example of at least one of the types of agency conflict to support your...

You are a finance expert and working as finance director for a manufacturing company. Which approach...

You are a finance expert and working as finance director for a manufacturing company. Which approach (among the three) you will adopt and WHY? 1: - Hedging Approach 2: - Aggressive Approach 3: - Conservative Approach Write an answer of 100 to 150 words on:

You are an economic consultant for XYZ Corporation who reports to the VP of Finance, Maria...

You are an economic consultant for XYZ Corporation who reports to the VP of Finance, Maria Horowitz. You learned that multiple departments of your company are collaborating to create a presentation for a prospective client that explains how XYZ Corporation can help them improve their business. Maria has been asked to present on several financial aspects of an organization. She tasks you with developing the sections of the presentation relating to globalization. The potential client, named Fourevr Enterprises, mentions it...

Let's say you're the head of finance at Gaga Enterprises, a fashion company. Your company needs...

Let's say you're the head of finance at Gaga Enterprises, a fashion company. Your company needs $ 10 million to expand its production. What is the point of raising the money with the help of a financial institution or directly from the financial market?

As the finance manager for a growing mining services company, you approach Bank West Limited to...

As the finance manager for a growing mining services company, you approach Bank West Limited to discuss their range of business loan facilities. Identify the fundamental principle of finance that relates to the use of both short-term and medium to longer-term finance by a business. Explain the principle and discuss why it is important.As the finance manager for a growing mining services company, you approach Bank West Limited to discuss their range of business loan facilities. Identify the fundamental principle...

Business Book Publishing needs to borrow $700,000 in order to finance its new inventory. Two banks...

Business Book Publishing needs to borrow $700,000 in order to finance its new inventory. Two banks were considering offered different annual loan terms: Marine Bank offered a 10% loan with a 15% compensating balance to be paid back in quarterly payments. McLean National Bank offered Business Book Publishing a 12% loan to be paid back semi-annually. Which loan terms should Business Book Publishing take?

Foreign Venue and External Environment Elements A company needs to assess several internal and external environmental...

Foreign Venue and External Environment Elements A company needs to assess several internal and external environmental elements before it can decide whether to expand into foreign markets. What is the most important external environmental element a company must consider when planning to enter a foreign venue?

Toyota Motor Company, headquartered in Japan, needs US$10,000,000 for three years to finance working capital for...

Toyota Motor Company, headquartered in Japan, needs US$10,000,000 for three years to finance working capital for its plant in Long Beach, CA. Toyota has two alternatives for borrowing: Borrow $10,000,000 in New York at 3.00% per annum. Borrow ¥1,200,000,000 in Tokyo at 1.00% per annum, and exchange these yen at the present exchange rate of ¥120/$ for U.S. dollars. For both loans, Toyota will make no payments until the end of three years, when principal and accumulated interest will be...

Question