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Home / Questions / Harper Engine Company needs \$623,000 to take a cash discount of 2.50/10, net 85. A banker ...

# Harper Engine Company needs \$623,000 to take a cash discount of 2.50/10, net 85. A banker will loan the money for 75 days at an interest cost of \$18,300. a. What is the effective rate on the bank loan

Harper Engine Company needs \$623,000 to take a cash discount of 2.50/10, net 85. A banker will loan the money for 75 days at an interest cost of \$18,300. 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.) Ellective 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 85 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? No Yes
d. If another banker requires a 10 percent compensating balance, how much must Harper borrow to end up with \$623,000? (Round your answer to 2 decimal places.) Amount to be borrowed e-1. What would be the effective interest rate in part dif the interest charge for 75 days were \$16,300? (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 % e-2. Should Harper borrow with the 10 percent compensating balance requirement?

Apr 14 2021 View more View Less

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