The Lasser Company Needs to Finance an Increase in Its

question 18

Multiple Choice

The Lasser Company needs to finance an increase in its working capital for the coming year.Lasser is reviewing the following three options: (1) The firm can borrow from its bank on a simple interest basis for one year at 13 percent.(2) It can borrow on a 3-month,but renewable,loan at a 12 percent simple rate.The loan is a simple interest loan,completely paid off at the end of each quarter,then renewed for another quarter.(3) The firm can increase its accounts payable by not taking discounts.Lasser buys on credit terms of 1/30,net 60 days.What is the effective annual cost (not the approximate cost) of the least expensive type of credit,assuming 360 days per year?

• A) 13.0%
• B) 12.82%
• C) 11.46%
• D) 12.12%
• E) 12.55%

---

Definitions:

Experiential Avoidance

A mental phenomenon in which people try to steer clear of thoughts, emotions, memories, and bodily sensations that cause them internal discomfort.

Mindfulness

A mental state achieved by focusing one's awareness on the present moment, while calmly acknowledging and accepting one's feelings, thoughts, and bodily sensations, used as a therapeutic technique.

Therapeutic Relationship

The professional bond between a therapist and a client, characterized by trust, respect, and mutual understanding, which facilitates the healing process.

ACT

Acceptance and Commitment Therapy, a form of psychotherapy that uses acceptance and mindfulness strategies mixed with commitment and behavior-change strategies.