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Question
Indurain has a revolving credit agreement with its bank under which the firm can borrow up to $750,000 at an interest rate of 2 percent over the prime rate. Currently the prime rate is 9.5%. Indurain is required to keep a 10% compensating balance on any borrowed funds and to pay a 0.50% per year commitment fee on the unused portion of the credit line. Indurain currently maintains a checking balance of $30,000. What is the annual financing cost to borrow $500,000 for 180 days if no additional funds are borrowed the remainder of the year?a. 12.24%
b. 13.04%
c. 12.50%
d. 12.78%
Answer
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Related questions
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Q:
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Q:
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Q:
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Q:
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Q:
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Q:
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Q:
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Q:
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b. relevant information is readily available for individuals and is costless to obtain
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Q:
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b. the value of the firm is independent of its capital structure in perfect capital markets with no income taxes
c. the firm's cost of capital is minimized when its capital structure consists of approximately equal proportions of debt and equity
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Q:
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Q:
Kenzel has an EPS of $4.20 and sales are $9 million. If the firm has a degree of operating leverage of 4.0 and a degree of financial leverage of 5.2, forecast EPS if the firm expects a 4% sales decline.
a. $0.71
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c. $4.03
d. $3.33