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Neo, Tutor
Category: Homework
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Experience:  BS Accounting
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1. Calculate the effective annual % rate of the forgoing cash

Customer Question

1. Calculate the effective annual % rate of the forgoing cash discount under each of the following credit terms: a) 2/10, net 60; b) 2/10,net 30.   2. Walters Manufacturing Co. has been approached by commercial paper dealer offering to sell an issue ofcomm.paper for the firm. The dealer indicates that Walters could sell a $5 million issue maturing in 182 days at an interest rate of 6% per annum(deducted in advance). The fee to dealer for selling issue would be $8,000. Determine Walters' annual financing cost of this commercial paper financing. 3. Pyramid has revolving credit agreesment with bank. Company can borrow up to $1 million at annual interest rate of 9%. Required to maintain 10% compensating balance on any funds borrowed and to pay 0.5% commitment fee on the unused credit line. Assume Pyr. has no funds left at bank. Determine annual financing cost of borrowing amounts under credit agreement: $250,000; $500,000;$1,000,000.
Submitted: 7 years ago.
Category: Homework
Expert:  Neo replied 7 years ago.

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Customer: replied 7 years ago.
Thanks so much for your help. You showed me I was going in the right direction with my figuring just needed that extra reassurance. Thanks again

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