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Question
Stephens Metals Company has a revolving credit agreement with its bank permitting it to borrow up to $25 million at an annual interest rate of 12%. Stephens is required to maintain a 10% compensating balance on any funds borrowed under this agreement and to pay a 0.5% commitment fee on the unused portion of the credit line. The company maintains a $500,000 balance at the bank that can be used to meet the compensating balance requirement. Determine the annual financing cost of borrowing $20 million under this revolving credit agreement.a. 13.3%
b. 13.5%
c. 13.1%
d. 12.0%
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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b. the value of the firm is independent of its capital structure in perfect capital markets with no income taxes
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Q:
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Q:
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d. $3.33