On February 3, 2012, the Burlington Western Company plans a commercial paper issue of $ 20 million. The firm has never used commercial paper before but has been assured by the firm placing the issue that it will have no difficulty raising the funds. The commercial paper will carry a 270- day maturity and require interest based on a rate of 11 percent per annum. In addition, the firm will have to pay fees totaling $ 200,000 to bring the issue to market and place it. What is the effective cost of the commercial paper to Burlington Western?
Answer to relevant QuestionsIdentify the primary characteristics of each form of legal organization. What major benefits do corporations and investors enjoy because of the existence of organized security exchanges? Calculate the effective cost of the following trade credit terms when payment is made on the net due date: a. 2/ 10, net 30 b. 3/ 15, net 30 c. 3/ 15, net 45 d. 2/ 15, net 60 What is meant by (a) Exchange risk and (b) Political risk? Suppose 1 year ago, Miller Company had inventory in Britain valued at 1.5 million Swiss francs. The exchange rate for dollars to Swiss francs was 1 franc = 1.15 dollars. Today, the exchange rate is 1 Swiss franc = 1.06 U. S. ...
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