Charmin Paper Company
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| Charmin Paper Company sells to the 12 accounts listed below. | ||||||||||
| Account | Receivable Balance Outstanding | Average of the Account over the Last Year | ||||||||
| A | $60,000 | 28 | ||||||||
| B | 120,000 | 43 | ||||||||
| C | 70,000 | 10 | ||||||||
| D | 20,000 | 52 | ||||||||
| E | 50,000 | 42 | ||||||||
| F | 220,000 | 34 | ||||||||
| G | 30,000 | 16 | ||||||||
| H | 300,000 | 65 | ||||||||
| I | 40,000 | 33 | ||||||||
| J | 90,000 | 50 | ||||||||
| K | 210,000 | 14 | ||||||||
| L | 60,000 | 35 | ||||||||
| 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 8.5 percent, and Capital charges 3.5 percent over prime to Charmin as its annual loan rate. | ||||||||||
| a. Determine the maximum loan for which Charmin Paper Company could qualify. | ||||||||||
| b. Determine how much one month’s interest expense would be on the loan balance determined in part a. | ||||||||||
13 years ago
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charmin_paper_company_solution.xlsx
