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Neveready Flashlights Inc. needs $351,000 to take a cash discount of 3/18, net 75. A banker will loan the money for 57 days at an interest cost of $12,200.
A) What is the effective rate on the bank loan?
B) How much would it cost (in percentage terms) if the firm did not take the cash discount but paid the bill in 75 days instead of 18 days?
C) If the banker requires a 20 percent compensating balance, how much must the firm borrow to end up with the $351,000?
D) What would be the effective interest rate in part d if the interest charge for 57 days were $7,200?
Assume that your required rate of return is 12% and you are given the following stream of cash flows
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