2. Hotwil Sdn. Bhd. facing a shortage of RM400,000 and the accountant has suggested obtaining funds...
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2. Hotwil Sdn. Bhd. facing a shortage of RM400,000 and the accountant has suggested obtaining funds for a period of 6 months to improve the situation. The following short-term sources of financing are available: i. ii. Borrow from Bank Rimau with charges of 9.5 percent annual interest and the loan are discounted. Accept a loan from Berjaya Ltd. and the charge is at a discount rate of 9 percent. Hence, Berjaya requires a compensating balance of 11 percent. iii. Acquire line of credit from CLSA Securities (M) Sdn Bhd with an amount of RM400,000. The finance company charges at a 10.5 percent simple interest. In addition, the finance company charges a commitment fee of 5 percent on the unused fund. iv. Based on the information above, calculate the effective cost for each alternative and choose the best sources of financing with a reason. 2. Hotwil Sdn. Bhd. facing a shortage of RM400,000 and the accountant has suggested obtaining funds for a period of 6 months to improve the situation. The following short-term sources of financing are available: i. ii. Borrow from Bank Rimau with charges of 9.5 percent annual interest and the loan are discounted. Accept a loan from Berjaya Ltd. and the charge is at a discount rate of 9 percent. Hence, Berjaya requires a compensating balance of 11 percent. iii. Acquire line of credit from CLSA Securities (M) Sdn Bhd with an amount of RM400,000. The finance company charges at a 10.5 percent simple interest. In addition, the finance company charges a commitment fee of 5 percent on the unused fund. iv. Based on the information above, calculate the effective cost for each alternative and choose the best sources of financing with a reason.
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To calculate the effective cost of each financing option we need to take into account all the costs associated with each option The effective cost is ... View the full answer
Related Book For
Essentials of Managerial Finance
ISBN: 978-0324422702
14th edition
Authors: Scott Besley, Eugene F. Brigham
Posted Date:
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