Hatter Enterprises Has Current Assets of $15 Million and a Current

question 188

Multiple Choice

Hatter Enterprises has current assets of $15 million and a current ratio of 3. The bank has offered Hatter a $13 million revolving credit agreement at an interest rate of 10%. Hatter will have to pay a commitment fee of 1% on the unused balance. Assuming that current assets and the current ratio remain constant, calculate the total annual financing charge associated with this agreement if Hatter borrows enough to support all of its net working capital.

• A)$1,030,000
• B)$1,240,000
• C)$1,310,000
• D)$1,390,000

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Definitions:

Erythrocyte

A vertebrate red blood cell; contains hemoglobin, which transports oxygen. Compare with leukocyte.

Biconcave Shape

Describes the geometry of objects, such as red blood cells, that are concave on both sides, aiding in flexibility and the area for gas exchange.

Mitochondria

Membrane-bound organelles found in the cytoplasm of almost all eukaryotic cells, responsible for generating most of the cell's supply of adenosine triphosphate (ATP), used as a source of chemical energy.

Nuclei

The plural of nucleus, referring to the membrane-bound organelles in cells that contain genetic material.