Winnipeg Washing Machines Wishes to Borrow $1

question 18

Multiple Choice

Winnipeg Washing Machines wishes to borrow $1.5 million for one month.Using its inventory as collateral,it can obtain a 10% (APR) loan.The lender requires that a warehouse arrangement be used,with a warehouse fee of $8,500,payable at the end of the month.What is the firm's EAR for this loan?

• A)18.2%
• B)16.8%
• C)10.5%
• D)17%
• E)17.4%

Recognize best practices and guidelines for success in family businesses.

Understand the dynamics and challenges of family members entering a family business.

Analyze major considerations in assessing the financial condition of an existing business.

Understand the nature of goodwill as an intangible asset.

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Definitions:

Interest Components

The different parts that make up the total interest calculation, including the principal amount, interest rate, and time period.

Principal

The original sum of money borrowed in a loan or the initial amount of investment, not including interest or profits.

Simple Interest

Interest assessed only on the base amount, or on whatever portion of the base amount has not been settled.

Interest

Payment made for the use of borrowed money, calculated as a percentage of the principal sum.