1. المملكة العربية السعودية وزارة التعليم العالي جامعة الإمام محمد بن سعود الإسلامية كلية الاقتصاد والعلوم الإدارية قسم التمويل والاستثمار المستوى الرابع مقرر مبادئ التمويل والاستثمار العام الجامعي : 1435- 1436 هـ الفصل الدراسي الأول الواجب التكميلي رقم 2 رقم الشعبة : التاريخ : إعداد الطالب :....................................................................

2. Problem A company needs to increase its working capital to XXXXXXXXX riyals, and there are several possible alternatives for funding: 1.Dispense cash discount payment when buying from a supplier that gives trade credit terms 3/10, net 40. 2.Get a 1 year short-term loan from the first bank at an interest rate of 7%, note that is required to keep 15% as a compensating balance. 3.Get a 1 year short-term loan from the second bank at a discounted interest rate of 7%, and the bank requires to retain 20% of the value of the loan as a compensating balance. 4.Get a 1 year short-term loan from the third bank at normal interest rate of 11 %. 5.Issuance of commercial papers at an interest rate of 8 %, note that the sale of this papers costing the company SR 4,000 / 6 months. Question: help the company to choose an alternative that reduces the real cost of funding? 2مبادئ التمويل والاستثمار - مال 102

3. Solution to Problem 1. Calculation the cost of the first alternative: Dispense cash discount payment when buying from a supplier that gives trade credit terms 3/10, net 40. 2.Calculation the cost of the second alternative: Get a 1 year short-term loan from the first bank at an interest rate of xxx%, note that is required to keep xxx% as a compensating balance. Note that the company needs to get xxxxxxx riyals, that will receive after excluding the compensating balance. So, we calculate the total value of the loan to get 100,000 riyals for the company. 3مبادئ التمويل والاستثمار - مال 102

4. 4 Solution to Problem مبادئ التمويل والاستثمار - مال 102

5. Solution to Problem The effective interest rate can be obtained using the following formula: 5مبادئ التمويل والاستثمار - مال 102

6. Solution to Problem 3.Calculation the cost of the third alternative: Get a 1 year short-term loan from the second bank at a discounted interest rate of 5%, and the bank requires to retain 25% of the value of the loan as a compensating balance. First we calculate the Face Value of the loan to collect 100,000 riyals. 6مبادئ التمويل والاستثمار - مال 102

7. Solution to Problem The effective interest rate can be obtained using the following formula: 4. Calculation of the cost of the fourth alternative: Get a 1 year short-term loan from the third bank at normal interest rate of xxx%. (Without Compensating Balance and simple interest) Effective interest rate = Nominal Interest Rate = xxxx%. Because: Face Value of the Loan = Net Cash Received 7مبادئ التمويل والاستثمار - مال 102

8. 5. Calculation of the cost of the fifth alternative: Issuance of commercial papers at an interest rate of xxxx %, note that the sale of this papers costing the company SR xxxxxxx / xxx months. First we calculate the Face Value of Commercial Papers to collect xxxxxxxxx riyals. 8 Solution to Problem مبادئ التمويل والاستثمار - مال 102

9. Answer to the question: help the company to choose the best alternative that reduces the cost of funding? 9 The Best Alternative Effective Interest Rate Alterna tives %xxxx1 %xxxxx2 3 xxxx%4 %xxxxx5 Solution to Problem مبادئ التمويل والاستثمار - مال 102