A) McGriff Dog Food Company normally takes 23 days to pay for average daily credit purchases of $9,350. Its average daily sales are $10,510, and it collects accounts in 27 days.
a. What is its net credit position? NET CREDIT POOSITION
b-1. If the firm extends its average payment period from 23 days to 35 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 POOSITION
B) Digital Access Inc. needs $302,940 in funds for a project. (Assume the loan term is one year.)
a. With a compensating balance requirement of 19 percent, how much will the firm need to borrow? (Do not round intermediate calculations.) AMOUNT TO BE BORROWED
b. Given your answer to part a and a stated interest rate of 18 percent on the total amount borrowed, what is the effective rate on the $302,940 actually being used? (Input your answer as a percent rounded to 2 decimal places.) EFFECTIVE RATE OF INTEREST
C) The treasurer for the Macon Blue Sox baseball team is seeking a $24,200 loan for one year from the 4th National Bank of Macon. The stated interest rate is 20 percent, and there is a 19 percent compensating balance requirement. The treasurer always keeps a minimum of $1,880 in the baseball team's checking accounts. These funds count toward meeting any compensating balance requirements. What will be the effective rate of interest on this loan? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.) EFFECTIVE RATE OF INTEREST
D) Your company plans to borrow $10 million for 12 months, and your banker gives you a stated rate of 14 percent interest. Calculate the effective rate of interest for the following types of loans.
a. Simple 14 percent interest with a compensating balance of 18 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.) EFFECTIVE RATEOF INTREST
b. Discounted interest (with no compensating balance). (Input your answer as percent rounded to EFFECTIVE RATEOF INTREST 2 decimal places.)
c. An installment loan (12 payments). (Input your answer as a percent rounded to 2 decimal places.) EFFECTIVE RATEOF INTREST
d. Discounted interest with a compensating balance of 9 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.) EFFECTIVE RATEOF INTREST
E) Harper Engine Company needs $638,000 to take a cash discount of 1.50/15, net 65. A banker will loan the money for 50 days at an interest cost of $16,800.
a. What is the effective rate on the bank loan? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
b. How much would it cost (in percentage terms) if Harper did not take the cash discount but paid the bill in 65 days instead of 15 days? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)