coroparte finance

QUESTION

43. Your firm has a line of credit with your local bank for $50,000. The loan agreement calls for interest of 9% with a 5% compensating balance requirement which is based on the total amount borrowed. What is the effective interest rate if you need $42,750 for one year to cover your operating expens
(44) Credit Amount = $50,000 Interest Rate = 9% Effective Interest Rate = ? EAR = (1 APR/12)12-1 EAR = (1 0.09 / 12)12 1 EAR = (1 0.0075)12 1 EAR = (1.0075)12 1 EAR = 1.093806898 1 EAR = 0.09380 (or) 9.38% The right option is (D) 9.38% (45) When a firm sells its accounts receivables to a financial institution, it is called Factoring. Hence, the right option is (E) none of the above Sale of a firms accounts receivable to a financial institution known as a factor (48) The Carrying value of a firms account receivable = $1,000,000 Average Collection Period = 55 days Credit Sales per day = ? Average collection period = [365 days /

vables Turnover] 55 days = [365 / Receivables Turnover] Receivables Turnover * 55 days = 365 days Receivables Turnover = [365 / 55] Receivables Turnover = 6.64 times Receivables Turnover = [Sales / Accounts Receivables] 6.64 = [Sales / $1,000,000] $1,000,000 * 6.64 times = Sales Sales = $6,640,000 Credit Sales per day = [$6,640,000 / 365] Credit Sales per day = $18,191.78 (approximately) Hence, the right option is (B) $18,181.82

ANSWER:

CLICK REQUEST FOR  AN EXPERT SOLUTION