Problem $8-35$

Rockford Filing Ltd$.$ requires $$1$ million in financing for a $45-$day period. Three alternatives are being considered $($Use $365$ days in a year. Do not round intermediate calculations. Round the final answers to $2$ decimal places.$)$

a$.$ Establish a line of credit with the bank at an interest rate of $10$ percent. The bank will charge a fee of $1\%$ to establish the line of credit.

b$.$ Forgo trade discounts from suppliers on terms of $\frac{2}{15},$ net $60.$

c$.$ Issue commercial paper for $45$ days at a discount of $1\mathrm{.}25$ percent.

a$.$ What is the actual percentage cost of the line of credit?

Rate of Interest for bank loan $\%$

b$.$ What would be the cost of forgoing the cash discount?

Cost of forgoing the cash discount $\%$

c$.$ What would be the Price and cost of commercial paper?

Price

Discounted commercial paper

$\%$