Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

The Thompson Corporation projects an increase in sales from $18 million to $25 million, but it needs an additional $500,000 of current assets to support this expansion. Thompson purchases under terms of 2/10, net 60 and currently pays on the 10th day, taking discounts. The CFO is considering using trade credit to finance the additional working capital required. Alternatively, Thompson can finance its expansion with a one-year loan from its bank. The bank has quoted the following alternative loan terms: a) 12 percent rate on a simple interest loan, with monthly interest payments. b) 10 percent annual rate on a discount interest basis with no compensating balance. c) 8.75 percent annual rate on a discount interest basis, with a 10 percent compensating balance. d) 8 percent add-on interest, with monthly payments. Based strictly on cost considerations only, what should Thompson do to finance its expansion?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M929109

Have any Question? 


Related Questions in Basic Finance

Ritz furniture has a contribution margin ratio of 011 if

Ritz furniture has a contribution margin ratio of 0.11. If fixed cost are $172,800 how man dollars of revenue must the company generate in order to reach the break-even point?

The following is an excerpt taken from a november 30 2007

The following is an excerpt taken from a November 30, 2007, speech entitled "Innovation, Information, and Regulation in Financial Markets" by Federal Reserve Governor Randall S. Kroszner (www. federalreserve.gov/newseven ...

What is partial amortizationa borrower obtains a fully

What is partial amortization? A borrower obtains a fully amortizing CPM loan for $125,000 at 11 percent interest for 10 years. What will be the monthly payment on the loan? If this loan had a maturity of 30 years, what w ...

Explain the difference between a forward contract and an

Explain the difference between a forward contract and an option? What factors distinguish a forward contract from a futures contract? What do forward and futures contracts have in common? What advantages does each have o ...

1 why does the inverse relationship between the inflation

1. Why does the inverse relationship between the inflation rate and the unemployment rate on the Phillips curve hold only in the short run? In the long run, what happens when the actual inflation rate differs from the ex ...

How does the value of an unlevered firm change if it takes

How does the value of an unlevered firm change if it takes on debt in the presence of corporate taxes? Repeat the analysis for ANF from the previous problem, after relaxing only the "no corporate tax" assumption of perfe ...

One of the behavioral research case studies in this chapter

One of the Behavioral Research Case Studies in this chapter involved Agocha and Cooper's (1999) study of partner characteristics and intentions to practice safe sex. Below are the Pearson correlations between the lik ...

If you wish to protect yourself from falling prices what

If you wish to protect yourself from falling prices, what type of an order would be the best to use? If you wish to protect yourself from rising prices, what type of order is the best to use? If you wish to buy a market ...

On august 20 a stock index futures which expires on

On August 20 a stock index futures, which expires on September 20, was priced at 429.70. The index was at 428.51. The dividend yield was 2.7 percent. Discuss the concept of the implied repo rate on an index arbitrage tra ...

1 discuss some of the major issues to consider when

1. Discuss some of the major issues to consider when choosing between an active or passive exporting strategy. 2. You work for a small company that has an innovative low-cost production method for high-capacity jump driv ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen