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?
Answer to relevant QuestionsWhich of the following offer the lowest effective rate for Wolf Howl jackets? Assume Wolf Howl will need to borrow $800,000 for 180 days. a. A 14% APR bank loan b. A 13% APR, discounted bank loan. c. 12.5% APR with fees of ...Briefly describe the five stages in the capita- budgeting process. Classify each of the following as a sunk cost, an opportunity cost, or neither. a. The firm has spent $1 million thus far to develop the next-generation robotic arm; it is now examining whether the project should ...Find the IRR and MIRR of a project if it has estimated cash flows of $5,500 annually for seven years if its year zero investment is $25,000. Annual savings from Project X include a reduction in ten clerical employees with annual salaries of $15,000 each, $8,000 from reduced production delays, $12,000 from lost sales due to inventory stockouts, and $3,000 in ...
Post your question