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ABC Company is considering to establish a line of credit with a local bank to make up for the cash deficit for the next
Posted: Thu Apr 28, 2022 1:34 pm
by answerhappygod
- Abc Company Is Considering To Establish A Line Of Credit With A Local Bank To Make Up For The Cash Deficit For The Next 1 (121.06 KiB) Viewed 18 times
ABC Company is considering to establish a line of credit with a local bank to make up for the cash deficit for the next three months. The company expects a 60% chance for a $216,757 deficit and a 40% chance for no deficit at all. The line of credit charges 0.69% of interest rate per month on the amount borrowed plus a commitment fee of $2,500 for a quarter. It also requires a 5% compensation balance for outstanding loans. The company can reinvest any excess cash at an annual rate of 8%. What will the expected cost of establishing a line of credit be? Round your answer to the nearest dollar. (Hint: Refer to a numerical example in short-term financing choices.) $5,334 $5,328 $5,321 $5,339 $5,345