### Define what is the effective rate of interest

Assignment Help Financial Management
##### Reference no: EM13215767

1) Ellis Sport Shop projects the following sales:

April - \$75,000
May - \$95,000
June - \$100,000

Seventy percent of Ellis' sales are on credit with 60 percent of receivables collected in the month after the sale and the rest of receivables collected in the second month after the sale. February sales were \$60,000 and March sales were \$70,000. In the past Ellis' bad debt percentage has been 0 and is expected to continue.

a) Prepare a monthly schedule of cash receipts for April-June.

b) What is the balance of Receivables at the end of June?

2) firm a stated rate of 10 percent interest. What is the effective rate of interest if the loan carries a simple 10 percent interest with a 20 percent compensating balance?

3) I suggest you look at examples in the electronic textbook and the problems assigned to determine how to rank each alternative. A&B Enterprises is trying to select the best investment from among four alternatives. Each alternative involves an initial outlay of \$100,000. Their cash flows follow:

Evaluate and rank each alternative based on a) payback period, and b) net present value (use a 10% discount rate).

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