The Shamrock Company has a raw materials inventory of $20 million, which is completely replaced approximately 10
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The Shamrock Company has a raw materials inventory of $20 million, which is completely replaced approximately 10 times a year. The Bridgewater Bank is willing to advance financing of 75% of the value of Shamrock’s inventory at an interest rate of 12%. However, it requires a warehousing system to secure its interests. A warehousing company will install and operate the system for $800,000 a year plus .5% of the value of materials entering the system. What is the effective cost of this financing to Shamrock?
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