Waec Model Questions Vol1 2023 Commerce Question 23
Practice objective / multiple choice question 23 from the 2023 Waec Model Questions Vol1 Commerce examination.
A manufacturing firm needs ₦5,000,000 for expansion. It can raise the funds through a bank loan (short‑term) at 12% p.a., a debenture issue (long‑term) at 9% p.a., and retained earnings (cost assumed 0%). The firm decides to finance 40% of the requirement by the bank loan, 35% by debentures and the remaining 25% by retained earnings. The bank charges a processing fee of 1% of the loan amount and the debenture issue incurs underwriting costs of 0.5% of the debenture amount. What is the effective overall cost of finance as a percentage of the total funds required? (Give your answer to two decimal places.)
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About This Question
This is Waec Model Questions Vol1 2023 Commerce Question 23. It is one of the objective questions from the 2023 Waec Model Questions Vol1 Commerce examination.
Difficulty level: Medium .
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