Beckheart is seeking financing for its inventory. Safe-proof Warehouses offers space in their facility for Beckheart’s inventory.
They offer loans with a 15 percent APR equal to 60 percent of the inventory. Monthly fees for the usage of the warehouse are $500 plus
0.5 percent of the inventory’s value. If Beckheart has saleable inventory of $2 million,
a. how much money can the firm borrow?
Amount able to borrow
b. what is the interest cost of the loan in dollars over a year?
c. what is the total amount of fees to be paid in a year?
d. what is the effective annual rate of using Safe-proof to finance Beckheart’s inventory?
Interest cost plus fees