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Along with the management of all the ingredents of Currents Assets,

every company required to manage its current liabilities effectivelty because these together will achieve goal of Net working capital management. the recent problems, forced to obtained financing on short term basis & following are the details related to need & financing options.
The Company has just acquired a large account. As a result, it will soon need an amount Rs 95,000 in working capital. It has been determined that there are three feasible sources of funds:
A.   Bank loan: The firm's bank will loan at 13 percent interest rate. A 10 percent compensating balance will be required. (Used discount Interst Method)
B.    Factoring: A factor will buy the company's receivables (Rs 160,000 per month), which have an average collection period of 30 days. The factor will advance up to 80% of the face value of the receivables at 12 percent on an annual basis. The factor also will charge a 3 percent fee on all receivables purchased. It has been estimated that the factor's services will save the company Rs 3,000 per month - consisting of both credit department expenses and bad-debts expenses.
C.    Issue Rs 100,000 of six-month commercial paper to net Rs 95,000. Assume that new paper would be issued every six months. (Note: Commercial paper has no stipulated interest rate. It is sold at a discount, and the amount of the discount determines the interest cost to the issuer.)
Suggest the best option of short term financing on the basis of effective annual interest rate or effective annual cost in %. 

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Subject: Business, Finance

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