Ch20_SSol - Wisconsin Distillers exports beer to Australia...

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Problem 20.1 Bankers' acceptances: Wisconsin Distillers (A) Assumptions Values Value of shipment $1,000,000 Credit terms, days 180 Bankers' acceptance fee 1.750% Wisconsin Distillers' WACC, per annum 10.000% All-in-cost of Bankers' Acceptance Face amount of bankers' acceptance $1,000,000.00 Less acceptance fee for 6-month maturity (8,750.00) ( face amount x acceptance fee x (term/360)) Amount received by Wisconsin Distillers $991,250.00 Opportunity cost of capital @ Wisconsin's WACC $49,562.50 (amount received x WACC x 180/360) Annualized percentage all-in-cost (AIC) 11.765% (acceptance fee +opportunity cost) / (amount received) x (360/180)
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Unformatted text preview: Wisconsin Distillers exports beer to Australia and invoices its customers in U.S. dollars. Sydney Wholesale Imports has purchased $1,000,000 of beer from Wisconsin Distillers, with payment due in 6 months. The payment will be made with a bankers’ acceptance issued by Charter Bank of Sydney at a fee of 1.75% per annum. Wisconsin Distillers has a weighted average cost of capital of 10%. If Wisconsin Distillers holds this acceptance to maturity. What is its annualized percentage all-in-cost?...
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This note was uploaded on 07/27/2011 for the course ECON 101 taught by Professor Dr. during the Spring '11 term at Columbia Union.

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