mock afternoon 74. 75 face, net, afternoon, discount, account

wangzilin

连着两道cooperate finance的计算题差点把我击倒，查了一下书，还是没有答案，希望牛人给正解。

 

74  a company is offered trade credit terms of 2/10, net 45. The implicit cost of failing to take the discount and instead paying the account in 45 days is closest to

 

A. 21.28%

B 23.10%

C 23.45%

 

C  (1+2/98)^(365/35)-1=23.45%  35是怎么冒出来的。

 

75 A company plans to issue 2500000(face value) of commercial paper for one month. The company is quoted a rate of 5.88 percent with a dealer's commission of 1/8 percent and a backup line cost of 1/4 percent, both of which will be assessed on the face value. The effective cost of the financing is closest to

A. 6.03%

B 6.16%

C 6.29%

 

C   这道题我没有查到公式.

sibrinall

2/10的意思是提前10还款，可以有2%的discount，所以是35天。

 

下面那题同等高人解答。。。。

terry0603

第二题，所有的费用都是根据face value计算出的，但是 effective cost 是说你实际花费的费用占market value的百分比。

Interested

The second question.
This is the topic covered on Page124 Vol.4. Corporate Finance & Portfolio Management.
The basic formula is
Effective Cost of Short-term borrowing = (Interest+Dealer's Commission+Backup Costs)/(Loan amount-Interest).

I found an easier way to do it and it's very effective.
The formula is: {[(Interest rate+Commission Rate+Backup Cost Rate)/12]/(1-Interest rate/12)}*12
The formula can apply to any kind of this type problem. It looks complicated. But it's really easy to be memorized. For example, in the second question you posted,
={[(.0588+.00125+.0025)/12]/(1-.0588/12)}*12=.06286 =>6.29%

Remember,
1. Divide the rates by 100 to convert to decimal numbers.
2. It's 12 there because the question is "monthly". If it's quarterly, divide by 4. Semiannually, divide by2.
3. The last "12" at the end means to annualized.
That's all I know. Good luck on your exam, everyone!

sibrinall

THX

wangzilin

太感谢所有space上的考友了这么多天解决了我好多问题啊。