+598 Mr. Lee is evaluating this option. He had decided to finance the purchase of this new inventory using a personal asset valued at $600,000 USD. The plan is to make a loan to his business. He prefers this alternative to bank financing and he is certain the product will generate a profit for his investment. His intention is to convert the asset to Canadian funds and invest it in two, successive 30-day GIC’s in order to accrue interest on this sum while waiting for the goods to arrive. The bank is offering a rate of 3.25% pa and the current exchange rate is 1CAD=0.900USD. He must decide whether to take the supplier’s offer or stick to his original plan and invest the full sum into GIC’s.
Total cost of goods is $680,000*
1. Will Mr. Lee have enough capital to cover the total cost of goods after he converts his USD funds to CAD? Show your calculation.
Any help would be greatly appreciated thanks
