Home / Questions / Harper Engine Company needs $602000 to take a cash discount of 25010 net 110 A banker will...
Harper Engine Company needs $602,000 to take a cash discount of 2.50/10, net 110. A banker will loan the money for 100 days at an interest cost of $14,600.
| a. |
What is the effective rate on the bank loan? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) |
| Effective rate of interest | % |
| b. |
How much would it cost (in percentage terms) if Harper did not take the cash discount but paid the bill in 110 days instead of 10 days? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) |
| Cost of not taking a cash discount | % |
| c. | Should Harper borrow the money to take the discount? | ||||
|
| d. |
If another banker requires a 10 percent compensating balance, how much must Harper borrow to end up with $602,000? (Round your answer to 2 decimal places.) |
| Amount to be borrowed | $ |
| e-1. |
What would be the effective interest rate in part d if the interest charge for 100 days were $12,600? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) |
| Effective rate of interest | % |
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