Neco Model Questions Vol1 2020 Commerce Question 36
Practice objective / multiple choice question 36 from the 2020 Neco Model Questions Vol1 Commerce examination.
A firm requires \(1,200,000\) naira for expansion. It can either (i) obtain a bank loan at \(10\%\) per annum compound interest, payable annually, for \(2\) years, with no additional fees; or (ii) raise the same amount by issuing debentures that carry \(8\%\) per annum interest payable semi‑annually and attract a flotation cost of \(2\%\) of the amount raised. Assuming the principal is repaid at the end of the \(2\)-year period, which source of finance will result in the lower total cash outflow after \(2\) years?
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About This Question
This is Neco Model Questions Vol1 2020 Commerce Question 36. It is one of the objective questions from the 2020 Neco Model Questions Vol1 Commerce examination.
Difficulty level: Medium .
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