Motoguzzie (A). Motoguzzie exports large –engine motorcycles (greater than 700 cc) to Australia and invoices its customers in U.S. dollars. Sydney Wholesale Imports has purchased $3,000,000 of merchandise from Motoguzzie, with payment due in six months. The payment will be made with a banker’s acceptance issued by Charter Bank of Sydney at a fee of 1.75% per annum. Motoguzzie has a weighted average cost of capital of 10%. If Motoguzzie holds this acceptance to maturity, what is its annualized percentage all-in-cost?
Motoguzzie (B). Assuming the facts in problem 1, Bank of America is now willing to buy Motoguzzie’s banker’s acceptance for a discount of 6% per annum. What would be Motoguzzie’s annualized percentage all –in cost of financing $3,000,000 Australian receivables?