Question: CDRW is evaluating an inventory financing arrangement with DVD Banks
CDRW is evaluating an inventory financing arrangement with DVD Banks. CDRW estimates an average monthly inventory balance of $800,000. DVD Bank is offering a 12 percent APR loan on 75 percent of the value of the inventory. DVD’s inventory storage and evaluation fees will be 1% a month on the total value of the inventory. What is the annual effective rate of the inventory loan?
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