On February 3, 2018, the Burlington Western Company plans a commercial paper issue of $25 million. The
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On February 3, 2018, the Burlington Western Company plans a commercial paper issue of $25 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 $150,000 to bring the issue to market and place it. What is the effective cost of the commercial paper to Burlington Western?
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Jehal Shah
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Related Book For 
Foundations Of Finance
ISBN: 9780135160619
10th Edition
Authors: Arthur J. Keown, John H. Martin, J. William Petty
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