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# eiteman_178963_im23 - Problem 23.1 Bankers Acceptances...

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Problem 23.1 Bankers' Acceptances: Wisconsin Distillers (A) What is the all-in-cost of using a bankers' acceptance? 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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Problem 23.2 Bankers' Acceptances: Wisconsin Distillers (B) What is the all-in-cost of using a bankers' acceptance? Assumptions Values Value of shipment \$1,000,000 Credit terms, days 180 Bankers' acceptance fee 1.750% Wisconsin Distillers' WACC, per annum 10.000% Discount rate on sale of acceptance, per annum 6.000% 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) Less discount on sale of acceptance (30,000.00) Amount received by Wisconsin Distillers \$961,250.00 Annualized percentage all-in-cost (AIC) 8.062% (acceptance fee + discount) / (amount received) x (360/180)
Problem 23.3 Trade Acceptance: Cutler Toyota What is the all-in-cost of using a trade acceptance? Assumptions Values Face amount of sale (first payment of 5) \$200,000 Down payment, 20% of payment \$40,000 Period for financing, days 180 Trade acceptance fee 2.000% Discount rate on sale of acceptance, per annum 3.000% All-in-Cost of Trade Acceptance Face amount of sale \$200,000.00 Less cash down-payment (40,000.00) Amount for financing \$160,000.00 Less trade acceptance fee (amount financed x acceptance fee x (days/360) ) (1,600.00) Less discount for the period (amount financed x discount rate x (days/360)) (2,400.00) Proceeds to Cutler Toyota \$156,000.00 a. Annualized percentage all-in-cost (AIC) 5.128% (acceptance fee + discount) / (amount received) x (360/180) b. Net cash proceeds to Cutler Toyota Down payment \$40,000 Proceeds of acceptance 156,000.00 Total cash proceeds \$196,000.00

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Problem 23.4 Trade Acceptance: Sun Microsystems (A) What is the all-in-cost of using a trade acceptance? Assumptions Values Face amount of sale € 700,000 Maturity, days 90 Trade acceptance fee, per annum 1.000% Discount rate on sale of acceptance, per annum 4.000% All-in-Cost of Trade Acceptance Face amount of the receivable € 700,000 Less trade acceptance fee (1,750) (amount financed x acceptance fee x (days/360) )
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eiteman_178963_im23 - Problem 23.1 Bankers Acceptances...

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