XYZ Corporation expects that it will need $1,000,000 cash for 90 days. The followings are possible...

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XYZ Corporation expects that it will need $1,000,000 cash for 90 days. The followings are possible means of financing available to the company: Strategy 1 XYZ Corporation establish a 1-year line of credit for $1,000,000. The bank requires a 2% compensating amount. The interest rate is 18% per annum and interest is prepaid. Funds are needed for 90 days. Strategy 2 XYZ Corporation establish a revolving credit for $1,200,000 and only used $1,000,000 for 90 days. The bank requires a 10% compensating amount and 1.5% commitment fees. The interest rate is 18% per annum. Determine which financing strategy of the above should be selected with supporting calculations. XYZ Corporation expects that it will need $1,000,000 cash for 90 days. The followings are possible means of financing available to the company: Strategy 1 XYZ Corporation establish a 1-year line of credit for $1,000,000. The bank requires a 2% compensating amount. The interest rate is 18% per annum and interest is prepaid. Funds are needed for 90 days. Strategy 2 XYZ Corporation establish a revolving credit for $1,200,000 and only used $1,000,000 for 90 days. The bank requires a 10% compensating amount and 1.5% commitment fees. The interest rate is 18% per annum. Determine which financing strategy of the above should be selected with supporting calculations.

Answer rating: 100% (QA)

Analyzing the Financing Strategies for XYZ Corporation Heres a breakdown of the two financing strate... View the full answer