QUESTION 3 SNP Company needs RM800,000 for a period of 200 days to increase its working capital. There are three alterna

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Question 3 Snp Company Needs Rm800 000 For A Period Of 200 Days To Increase Its Working Capital There Are Three Alterna 1 (35.31 KiB) Viewed 32 times

QUESTION 3 SNP Company needs RM800,000 for a period of 200 days to increase its working capital. There are three alternatives available: Alternative Borrow from NY Bank at 12 percent per annum. This alternative would necessitate the company to maintain 5 percent compensating balance. Alternative !! Issue commercial papers with a denomination of RM20,000 per paper and the floatation cost is RM100 per paper. The interest rate is estimated to be 10 percent per annum a) ⒸHak Cipta Universiti Teknologi MARA CONFIDENTIAL CONFIDENTIAL BM/DEC 2015/FIN420/5-40 Alternative !!! RM850,000 line of credit offered by Pariby Bank at 8 percent per annum. This alternative also requires a 3.5 percent commitment fee and RM40,000 compensating balance. Assume a 360-day per year, calculate the effective cost for each of the above alternatives. (10 marks)