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fgiga [73]
3 years ago
10

On July 1, Dichter Company obtained a $2,000,000, 180-day bank loan at an annual rate of 12%. The loan agreement requires Dichte

r to maintain a $400,000 compensating balance in its checking account at the lending bank. Dichter would otherwise maintain a balance of only $200,000 in this account. The checking account earns interest at an annual rate of 6%. Based on a 360-day year, the effective interest rate on the borrowing is
Business
2 answers:
belka [17]3 years ago
6 0

Answer: 12.67%

Explanation:

The effective interest rate on a borrowing is the net annual interest cost divided by the net available proceeds from the borrowing. Dichter gross annual interest cost is $240,000 ($2,000,000 x 12%). Dichter is required to maintain a compensating balance of $400,000, which is $200,000 more than their normal balance of $200,000. Therefore, Dichter earns incremental annual interest revenue of $12,000 ($200,000 x 6%) on the excess compensating balance. The net annual interest cost is $228,000 ($240,000 - $12,000). The net available proceeds from the borrowing is $1,800,000 ($2,000,000 loan less $200,000 excess compensating balance). Therefore, the effective annual interest rate is 12.67%

AnnZ [28]3 years ago
5 0

Answer:

The annual effective  interest rate based on a 360 day period is 12.67%

Explanation:

The effective interest rate for a 180 day borrowing period is the ratio of net interest cost  to net available proceeds.

The net interest cost = the gross interest cost -  the incremental interest revenue.

The gross interest cost =  $2,000,000 × 12% × (6  months ÷ 12 months) = $2,000,000 × 0.12 × 0.5 = $120,000

the incremental interest revenue =  $200,000 × 6% ×  (6 months ÷ 12 months) = $200,000 × 0.06 ×  0.5= $6,000

Since the net interest cost = the gross interest cost -  the incremental interest revenue

Net interest cost =  $120,000 - $6,000 = $114,000

net available proceeds = $2000000 - $200000 = $1800000

Therefore, the  effective interest rate based om a 180 day period = net interest cost/net available proceeds = $114,000 / $1,800,000 = 0.0633 = 6.33%

The annual effective  interest rate based on a 360 day period = 6.33% × 2 = 12.67%

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2 years ago
Procter & gamble is well known for its use of __________ branding because every product in p&g's portfolio has a differe
taurus [48]

Answer:

Individual branding

Explanation:

Procter & gamble is well known for its use of individual branding because every product in p&g's portfolio has a different brand name.

Individual branding can be defined as a market strategy in which every products sold by a firm has its own unique brand name. Individual branding can also be called "multibranding", "individual product branding", and "flanker brand".

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3 years ago
. The residents of Vegopia spend all of their income on cauliflower, broccoli, and carrots. In 2010, they each buy 100 heads of
EastWind [94]

Answer:

a. For 2010 =$325  For 2011 = $445

b. 136.92%

c.  38.89%

Explanation:

a. The computation of the price of each vegetable is shown below:

For year 2010:

= Cauliflower price + broccoli price + carrots price

= $200 + $75 + $50

= $325

For year 2011:

= Cauliflower price + broccoli price + carrots price

= $225 + $120 + $100

= $445

b. The computation of CPI is shown below:

= (2011 Price ÷ 2010 Price) × 100

= ($445 ÷ $325) × 100

= 136.92%

c. The inflation rate is shown below:

= (2011 per total vegetables price - 2010  per total vegetables price) ÷  2010  per total vegetables price

= ($5.00 - $3.60) ÷ $3.60

= 38.89%

Per vegetable price = (Price of each vegetable ÷ number of each vegetable)

For 2010:

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Broccoli = ($75 ÷ 50) = $1.5

Carrots = ($50 ÷ 500) = $0.10

The total would be $3.60

For 2011:

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The total would be $5.00

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3 years ago
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Answer: No.

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This is a Perfectly Competitive market and that means that you are a price taker who maximises output at a point where Marginal Revenue equals Marginal Cost ( MR = MC). As costs have gone up, it simply means that for the conditions to be satisfied, you need to produce less at the factory in Connecticut.

That does not mean that you have to produce more at the Massachusetts plant because it is already producing at capacity and increasing the marginal cost would violate the MR=MC rule as you have no control over the price so you cannot change Marginal Revenue. It is therefore better to keep the production level at the Massachusetts plant unchanged.

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3 years ago
Assume Mercy Hospital underestimated the provision for bad debts and contractual adjustments reported on its December 31, 2015 i
attashe74 [19]

Answer:

If the hospital underestimated its bad debt, that means that they are overestimating their profits. The cash flow is determined using the income statement, so it will also be overestimated. But at some point reality will catch up and the actual cash flow will be less than expected, since bad debts reduce actual revenue.

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