Waec Model Questions Vol1 2017 Commerce Question 9
Practice objective / multiple choice question 9 from the 2017 Waec Model Questions Vol1 Commerce examination.
A firm needs ₦10,000,000 to purchase a new machine. It can raise the money from three sources: retained earnings (cost 12 % p.a.), a bank loan (cost 15 % p.a. plus a 2 % arrangement fee on the amount borrowed) and 10‑year bonds (cost 10 % p.a. plus a 3 % flotation cost on the issue amount). At least 30 % of the total funds must come from retained earnings and the bank loan cannot exceed ₦4,000,000. Determine the optimal mix of the three sources that minimises the annual financing cost (ignore one‑time fees for this part) and compute the total one‑time fees payable for the chosen mix.
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About This Question
This is Waec Model Questions Vol1 2017 Commerce Question 9. It is one of the objective questions from the 2017 Waec Model Questions Vol1 Commerce examination.
Difficulty level: Medium .
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