Inventory financing Raymond Manufacturing faces a liquidity crisis—it needs a loan of $96,000 for 1 month. Having no source of additional unsecured borrowing, the firm must find a secured short-term lender. The firm's accounts receivable are quite low, but its inventory is considered liquid and reasonably good collateral. The book value of the inventory is $288,000, of which $115,200 is finished goods. (Note: Assume a 365-day year.)(1) City-Wide Bank will make a $96,000 trust receipt loan against the finished goods inventory. The annual interest rate on the loan is 11.6% on the outstanding loan balance plus a 0.23% administration fee levied against the $96,000initial loan amount. Because it will be liquidated as inventory is sold, the average amount owed over the month is expected to be $68,602.(2) Sun State Bank will lend $96,000against a floating lien on the book value of inventory for the 1-month period at an annual interest rate of 13.5%.(3) Citizens' Bank and Trust will lend $96,000 against a warehouse receipt on the finished goods inventory and charge 15.4% annual interest on the outstanding loan balance. A 0.61% warehousing fee will be levied against the average amount borrowed. Because the loan will be liquidated as inventory is sold, the average loan balance is expected to be $57,600. please explain in excel a. Calculate the dollar cost of each of the proposed plans for obtaining an initial loan amount of $96,000.b. Which plan do you recommend? Why?c. If the firm had made a purchase of $96,000 for which it had been given terms of 1/10 net 26, would it increase the firm's profitability to give up the discount and not borrow as recommended in part b?Why or why not? Inventory financing Raymond Manufacturing faces a liquidity crisis-it needs a loan of $96,000 for 1 month. Having no source of additional unsecured borrowing,the firm must find a secured short-term lender. The firm's accounts receivable are quite low, but its inventory is considered liquid and reasonably good collateral. Thebook value of the inventory is $288,000, of which $115,200 is finished goods. (Note: Assume a 365-day year.)(1) City-Wide Bank will make a $96,000 trust receipt loan against the finished goods inventory. The annual interest rate on the loan is 11.6% on the outstanding loanbalance plus a 0.23% administration fee levied against the $96,000 initial loan amount. Because it will be liquidated as inventory is sold, the average amount owedover the month is expected to be $68,602.(2) Sun State Bank will lend $96,000 against a floating lien on the book value of inventory for the 1-month period at an annual interest rate of 13.5%.(3) Citizens' Bank and Trust will lend $96,000 against a warehouse receipt on the finished goods inventory and charge 15.4% annual interest on the outstanding loanbalance. A 0.61% warehousing fee will be levied against the average amount borrowed. Because the loan will be liquidated as inventory is sold, the average loanbalance is expected to be $57,600.a. Calculate the dollar cost of each of the proposed plans for obtaining an initial loan amount of $96,000.b. Which plan do you recommend? Why?c. If the firm had made a purchase of $96,000 for which it had been given terms of 1/10 net 26, would it increase the firm's profitability to give up the discount and nota. The dollar cost of the trust receipt loan is $(Round to the nearest cent.)

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Inventory financing Raymond Manufacturing faces a liquidity crisis—it needs a loan of $96,000 for 1 month. Having no source of additional unsecured borrowing, the firm must find a secured short-term lender. The firm's accounts receivable are quite low, but its inventory is considered liquid and reasonably good collateral. The book value of the inventory is $288,000, of which $115,200 is finished goods. (Note: Assume a 365-day year.) (1) City-Wide Bank will make a $96,000 trust receipt loan against the finished goods inventory. The annual interest rate on the loan is 11.6% on the outstanding loan balance plus a 0.23% administration fee levied against the $96,000 initial loan amount. Because it will be liquidated as inventory is sold, the average amount owed over the month is expected to be $68,602. (2) Sun State Bank will lend $96,000 against a floating lien on the book value of inventory for the 1-month period at an annual interest rate of 13.5%. (3) Citizens' Bank and Trust will lend $96,000 against a warehouse receipt on the finished goods inventory and charge 15.4% annual interest on the outstanding loan balance. A 0.61% warehousing fee will be levied against the average amount borrowed. Because the loan will be liquidated as inventory is sold, the average loan balance is expected to be $57,600. please explain in excel a. Calculate the dollar cost of each of the proposed plans for obtaining an initial loan amount of $96,000. b. Which plan do you recommend? Why? c. If the firm had made a purchase of $96,000 for which it had been given terms of 1/10 net 26, would it increase the firm's profitability to give up the discount and not borrow as recommended in part b? Why or why not?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

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ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

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Inventory financing Raymond Manufacturing faces a liquidity crisis—it needs a loan of $96,000 for 1 month. Having no source of additional unsecured borrowing, the firm must find a secured short-term lender. The firm's accounts receivable are quite low, but its inventory is considered liquid and reasonably good collateral. The book value of the inventory is $288,000, of which $115,200 is finished goods.

(Note: Assume a 365-day year.)

(1) City-Wide Bank will make a $96,000 trust receipt loan against the finished goods inventory. The annual interest rate on the loan is 11.6% on the outstanding loan balance plus a 0.23% administration fee levied against the $96,000
initial loan amount. Because it will be liquidated as inventory is sold, the average amount owed over the month is expected to be $68,602.

(2) Sun State Bank will lend $96,000
against a floating lien on the book value of inventory for the 1-month period at an annual interest rate of 13.5%.

(3) Citizens' Bank and Trust will lend $96,000 against a warehouse receipt on the finished goods inventory and charge 15.4% annual interest on the outstanding loan balance. A 0.61% warehousing fee will be levied against the average amount borrowed. Because the loan will be liquidated as inventory is sold, the average loan balance is expected to be $57,600.

please explain in excel

a. Calculate the dollar cost of each of the proposed plans for obtaining an initial loan amount of $96,000.

b. Which plan do you recommend? Why?

c. If the firm had made a purchase of $96,000 for which it had been given terms of 1/10 net 26, would it increase the firm's profitability to give up the discount and not borrow as recommended in part b?
Why or why not?

Inventory financing Raymond Manufacturing faces a liquidity crisis-it needs a loan of $96,000 for 1 month. Having no source of additional unsecured borrowing,
the firm must find a secured short-term lender. The firm's accounts receivable are quite low, but its inventory is considered liquid and reasonably good collateral. The
book value of the inventory is $288,000, of which $115,200 is finished goods. (Note: Assume a 365-day year.)
(1) City-Wide Bank will make a $96,000 trust receipt loan against the finished goods inventory. The annual interest rate on the loan is 11.6% on the outstanding loan
balance plus a 0.23% administration fee levied against the $96,000 initial loan amount. Because it will be liquidated as inventory is sold, the average amount owed
over the month is expected to be $68,602.
(2) Sun State Bank will lend $96,000 against a floating lien on the book value of inventory for the 1-month period at an annual interest rate of 13.5%.
(3) Citizens' Bank and Trust will lend $96,000 against a warehouse receipt on the finished goods inventory and charge 15.4% annual interest on the outstanding loan
balance. A 0.61% warehousing fee will be levied against the average amount borrowed. Because the loan will be liquidated as inventory is sold, the average loan
balance is expected to be $57,600.
a. Calculate the dollar cost of each of the proposed plans for obtaining an initial loan amount of $96,000.
b. Which plan do you recommend? Why?
c. If the firm had made a purchase of $96,000 for which it had been given terms of 1/10 net 26, would it increase the firm's profitability to give up the discount and not
a. The dollar cost of the trust receipt loan is $
(Round to the nearest cent.)

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