Samantha Karp fin 200 loan scenarios

Samantha Karp fin 200 loan scenarios - the money for an...

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Samantha Karp Midland Chemical a. Compensating Balance Loan $500,000 8.25% $ 41,250 Interest $500,000 Loan 100,000 20% compensating balance requirement $400,000 Available funds Fee-added Loan $500,000 9.75% $ 48,750 Interest Interest plus fees $48,750 Interest 5,500 Fees $54,250 The loan with the compensating requirement has the lower effective cost (10.312% vs 10.850%).
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The cost of not taking the cash discount is greater than the cost of the loan (13.680% vs. 10.312%) so the firm should take the cash discount. d. If the firm is going to take 80 days to pay if it does take the cash discount, then it is keeping
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Unformatted text preview: the money for an extra 70 days. The cost of not taking the cash discount and keeping the money for 70 more days is: The cost of not taking the cash discount is less than the cost of the loan (7.183% vs. 10.312%) so the firm should not take the cash discount. e. 500,000 10.25% $51,250 Interest f. Profit on Treasury Bonds Sale price, Treasury bonds $500,000 Price price, Treasury bonds 488,000 Profit on futures contract $ 12,000 Extra interest cost $500,000 x 2% $ 10,000 The firm effectively hedged its position as the gain on the treasury bonds....
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Samantha Karp fin 200 loan scenarios - the money for an...

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