Homework SourseCapital Financial Corporation will lend 90 percent against a
Capital Financial Corporation will lend 90 percent against account balances that have averaged 30 days or less; 80 percent for account balances between 31 and 40 days; and 70 percent for account balances between 41 and 45 days. Customers that take over 45 days to pay their bills are not considered acceptable accounts for a loan.
The current prime rate is 16.50 percent, and Capital charges 4.50 percent over prime to Charmin as its annual loan rate.
Determine the maximum loan for which Charmin Paper Company could qualify.
Determine how much one month’s interest expense would be on the loan balance determined in part a. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
| Charmin Paper Company sells to the 12 accounts listed next. |
Solution
a).
0 - 30 days Amount
A $63,400
C 77,300
G 32,200
K 229,000
Total $401,900
Loan % 90%
Loan $361,710
31 - 40 days Amount
F $297,000
I 40,100
L 63,000
Total $400,100
Loan % 80%
Loan $320,080
41 - 45 days Amount
B $165,000
E 50,000
Total $215,000
Loan % 70%
Loan $150,500
Maximum Loan = $361,710 + $320,080 + $150,500 = $832,290
b). Loan Balances $832,290
Interest,21% annual
(16.5% Prime + 4.5%) 1.75%(=21%/12)
One month\'s interest $14,565.08
