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Your company plans to borrow $12 million

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Question

9)Your company plans to borrow $12 million for 12 months, and your banker gives you a stated rate of 21

percent interest.

Calculate the effective rate of interest for the following types of loans.
a.Simple 21 percent interest with a compensating balance of 12 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)
  Effective rate of interest%  
b.Discounted interest (with no compensating balance). (Input your answer as percent rounded to 2 decimal places.)
  Effective rate of interest%  
c.An installment loan (12 payments). (Input your answer as a percent rounded to 2 decimal places.)
  Effective rate of interest%  
d.Discounted interest with a compensating balance of 6 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)
  Effective rate of interest %  
 
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Carey Company

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8)Carey Company is borrowing $250,000 for one year at 10.0 percent from Second Intrastate Bank. The bank

requires a 18 percent compensating balance. The principal refers to funds the firm can effectively utilize (Amount borrowed − Compensating balance).

a.What is the effective rate of interest? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)
  Effective rate of interest%  
b.What would the effective rate be if Carey were required to make 12 equal monthly payments to retire the loan? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)
  Effective rate of interest %  
 
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McGriff Dog Food Company

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Question

7)McGriff Dog Food Company normally takes 30 days to pay for average daily credit purchases of $9,470. Its

average daily sales are $10,000, and it collects accounts in 35 days.

a. What is its net credit position?
  Net credit position$  
b-1.If the firm extends its average payment period from 30 days to 38 days (and all else remains the same), what is the firm’s new net credit position? (Negative amount should be indicated by a minus sign.)
  Net credit position$  
b-2.Has the firm improved its cash flow?
  YesNo
 
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A new computer system will require an initial outlay of $18,500

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A new computer system will require an initial outlay of $18,500, but it will increase the firm’s cash flows by

$3,700 a year for each of the next 7 years.

a.Calculate the NPV and decide if the system is worth installing if the required rate of return is 10%. What if it is 15%? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)
Rate of Return NPV        Worth Installing    
10%         $     (Click to select)NoYes
15%         $   (Click to select)YesNo
b.How high can the discount rate be before you would reject the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
  Maximum discount rate %  
 
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