a) Annual Rate formula:

I= $8,100
P= $300,000
d= 60

I/P 0.027
365/d 6.0833333333

Annual Rate: 16.43%

b)
Foregoing cash discount formula

d% = 3%
F(date) = 70 days
D(date) = 10 days

d%/100%-d% 3.09%
365/f(date)-d(date) 6.0833333333

Foregoing Discount Rate 18.81%

c) Yes, because the cost of borrowing is less than the cost of losing the discount.

d)

Amount Needed = $300,000

 c = 20%

Amount to be Borrowed = $ 375,000.00

e)

I= $10,125
P= $375,000
B= $75,000 <--- ($375,000-$300,000)
d= 60 days

I/(p-b) 0.03375
365/d 6.0833333333

Rate 20.53%
a)
Commitment Fee= 1,000,000*1%
$ 10,000.00

Interest Expense= $1,000,000*10%*45/365

$ 12,328.77

Total Interest= $ 22,328.77

I= $22,328.77
P= $1,000,000
d= 45

I/P 0.02232877
365/d 8.11111111111111

Rate 18.11%

b)

d% = 2%
f(date) = 60 days
d(date) = 15 days

d%/100%-d% 0.0204081632653061
365/f(date)-d(date) 8.11111111111111

Rate 16.55%

c)
I= 12500 <----$1,000,000x1.25%
P= 1,000,000
d= 45 days

I/P-I 0.0126582278481013
365/D 8.11111111111111

Rate 10.27%
Initital Investment= $20,000

Year 0 $ (20,000.00)
Year 1 $ 10,000.00
Year 2 $ 9,000.00
Year 3 $ 6,500.00

a)

IRR 14.27%

B)
Cost of Capital 12%

NPV $729.89

c)

PV of Inflows:
CF PV
Year 1 $ 10,000.00 $8,928.57
Year 2 $ 9,000.00 $ 7,174.74
Year 3 $ 6,500.00 $ 4,626.57

TOTAL (PV of Inflows) $20,729.89

PV of Outflows $ 20,000.00

Profitability Index= 1.04

 Project X Project y
Year 0 $ (10,000.00) $ (30,000.00)
Year 1 $ 5,000.00 $ 15,000.00
Year 2 $ 3,000.00 $ 8,000.00
Year 3 $ 4,000.00 $ 9,000.00
Year 4 $ 3,600.00 $ 11,000.00

Cost of Capital 10%

NPV $2,488.90 $4,522.92

Proftiability Index

Project X PV Project Y PV
Year 1 $ 5,000.00 $ 4,545.45 $ 15,000.00 $ 13,636.36
Year 2 $ 3,000.00 $ 2,479.34 $ 8,000.00 $ 6,611.57
Year 3 $ 4,000.00 $ 3,005.26 $ 9,000.00 $ 6,761.83
Year 4 $ 3,600.00 $ 2,458.85 $ 11,000.00 $ 7,513.15
TOTAL $ 12,488.90 $ 34,522.92

PV of Outflows $ 10,000.00 $ 30,000.00

PI 1.25 1.15
 April May June July
Sales $ 320,000.00 $ 300,000.00 $ 275,000.00 $ 275,000.00
Credit Sales $ 288,000.00 $ 270,000.00 $ 247,500.00 $ 247,500.00
Cash Sales $ 32,000.00 $ 30,000.00 $ 27,500.00 $ 27,500.00

Collection (month after sales) $ 57,600.00 $ 54,000.00 $ 49,500.00

Collection (second month after sale) $ 230,400.00 $ 216,000.00
Total Cash Receipts $ 311,900.00 $ 293,000.00

Purchases $ 130,000.00 $ 120,000.00 $ 120,000.00 $ 180,000.00

Payments (month after purchase;40%) $ 52,000.00 $ 48,000.00 $ 48,000.00
Payments (second month after purchase;60%) $ 78,000.00 $ 72,000.00
Labour $ 27,500.00 $ 27,500.00
Overhead $ 12,000.00 $ 12,000.00
Interest Payments $ 30,000.00
Cash Dividend $ 50,000.00
Tax Payments $ 25,000.00
Capital Outlay
Total Purchases $ 270,500.00 $ 159,500.00

Net Cash Flow $ 41,400.00 $ 133,500.00

Beginning Cash Flow $ 20,000.00 $ 50,000.00

Cumulative Cash Flow $ 61,400.00 $ 183,500.00
Monthly borrowing (repayment)
Cumulative Loan Balance
Marketable Securities purchased (sold) $ 11,400.00 $ 133,500.00
Cumulative Marketable Securities $ 11,400.00 $ 144,900.00
Ending Cash Flow $ 50,000.00 $ 50,000.00
August September
$ 290,000.00 $ 330,000.00
$ 261,000.00 $ 297,000.00
$ 29,000.00 $ 33,000.00

$ 49,500.00 $ 52,200.00
$ 198,000.00 $ 198,000.00
$ 276,500.00 $ 283,200.00

$ 200,000.00 $ 170,000.00
$ 72,000.00 $ 80,000.00
$ 72,000.00 $ 108,000.00
$ 29,000.00 $ 33,000.00
$ 12,000.00 $ 12,000.00
$ 30,000.00
-18400
$ 25,000.00 15000
$ 300,000.00
$ 185,000.00 $ 588,000.00

$ 91,500.00 $ (304,800.00)

$ 50,000.00 $ 50,000.00
$ 141,500.00 $ (254,800.00) Cumulative Marketable Securities $236,400
$ 33,400.00 Cumulative Cash balance (Septembe ($254,800)
$ 33,400.00 Required ending cash balance (min -15000
$ 91,500.00 $ (236,400.00) Monthly Borrowing ($33,400)
$ 236,400.00 $ -
$ 50,000.00 $ 15,000.00