Annual financing cost of commercial paper financing
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Walter's Manufacturing Company has been approached by a commercial paper dealer offering to sell an issue of commercial paper of the firm. THe dealer indicates that the Walters could sell a $5 million issue maturing in 182 days at an interest rate of 6 percent per annum (deducted advanced). The fee to the dealer for selling the issue would be $8,000. Determine Walter's annual financing cost of this commercial paper financing.
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Response explains the method to compute the annual financing cost of commercial paper financing
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