FIN – Rate of Annual Interest Calculation

| August 14, 2017

Your hospital has billed charges of $4,000,000 in February. If your collection experience indicates that 20 percent is paid in the month billed, 40 percent in the second month, 20 percent in the third month, and 5 percent in the fourth month, determine the following values:a) Net patient revenue for Februaryb) Collections of February charges in Februaryc) Net accounts receivable at the end of March for February billings. Your firm is considering the following three alternative bank loans for $1,000,000:a) 10 percent loan paid at year end with no compensating balanceb) 9 percent loan paid at year end with a 20 percent compensating balancec) 6 percent loan that is discounted with a 20 percent compensating balance requirementAssume that you would normally not carry any bank balance that would meet the 20 percent compensating balance requirement. What is the rate of annual interest on each loan?

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