1 van buren resources inc is considering borrowing, Ask an Expert

Finance

1. Van Buren Resources, Inc., is considering borrowing $100,000 for 182 days from its bank. Van Buren will pay $6,000 of interest at maturity, and it will repay the $100,000 of principal at maturity.

a. Calculate the loan's annual financing cost.

b. Calculate the loan's annual percentage rate.

c. What is the reason for the difference in your answers to parts a and b?

2. Determine the annual financing cost of forgoing the cash discount under each of the following credit terms:

a. 2/10, net 60

b. 1½/10, net 60 c. 2/30, net 60

d. 5/30, net four months (assume 122 days) e. 1/10, net 30.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91600025

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