# 10 & # 12 please :)

-on. f year? (Consider the 10 percent fall in the value of the dollar as well as the inter- est payment.) 10. Talmud Book Company borrows $16,000 for 30 days at 9 percent interest. What Dollar cost of a is the dollar cost of the loan? loan Dollar cost of loan (LO2) = Amount borrowed X Interest rate Days loan is outstanding Days in the year (360) Net credit position 11. McGriff Dog Food Company normally takes 20 days to pay for average daily credit purchases of $9,000. Its average daily sales are $10,000, and it collects accounts in 25 days. (LOI) a. What is its net credit position? That is, compute its accounts receivable and accounts payable and subtract the latter from the former. Accounts receivable B Average daily credit sales X Average collection period Average daily credit purchases X Average payment period Accounts payable : b. If the firm extends its average payment period from 20 days to 32 days (and all else remains the same), what is the firm's new net credit position? Has it improved its cash flow? 12. Logan Drilling Corp. plans to borrow $200,000 for one year. Northern National Bank will lend the money at 10 percent interest and requires a compensating balance of 20 percent. What is the effective rate of interest? 13. Computer Graphics Company needs $250,000 in funds for a project. a. With a compensating balance requirement of 20 percent, how much will the firm need to borrow? b. Given your answer to part a and a stated interest rate of 10 percent on the total amount borrowed, what is the effective rate on the $250,000 actually being used? Compensating balances (L02) X Compensating balances (LO2)