+1-415-670-9189
info@expertsmind.com
Estimate the cost of credit line
Course:- Financial Management
Reference No.:- EM13943014




Assignment Help
Assignment Help >> Financial Management

You recently approached your bank about establishing a credit line facility. The terms offered by your bank include a nominal rate of prime + 1.5% (prime is currently 5%) on the amount borrowed, a commitment fee of 25 basis points on the unused portion of the credit line, and a compensating balance of 10% on the amount borrowed.

You decide to establish the line for $75 million. Over the course of a year, you anticipate the average amount borrowed to be $55 million. Your firm keeps no balances at the bank paying fees for all cash management services.

Estimate the cost of credit line.

Assume that the firm did have cash balances to cover the required compensating balances resulting from the credit line borrowings. Estimate the effective cost of the credit line.




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
Trivia soft is currently unlevered tc=40% the board has approved b/s ratio of 400%. Proceeds of new debt will be used to buy back stock. Tax savings will increase the value of
Compare and contrast the commitments taken on by a futures contract seller versus a buyer of a put option. Compare and contrast the commitments taken on by a futures contract
Bob would like to have $26,000 in 5 years to use as a down payment on a house. He plans on depositing an equal of money at the end of every month to save for this goal. If Bob
You are considering an investment with an initial cost of $295,000, which will be fully depreciated over three years. What is the average accounting return on this investment
Per the IRC, losses and deductions of an S corporation pass through to the shareholders of the corporation and are limited to the shareholders’ basis in the S corporation. Sug
Assume that the average firm in your company's industry is expected to grow at a constant rate of 5% and that its dividend yield is 7%. If the last dividend paid (D0) was $3,
At a certain rate of interest the present values of the following two payments are the same. At the same interest rate $1000 invested now plus $2000 invested in 5 years will a
Vandalay Industries is trying to choose between two alternative (mutually exclusive) machines. Whichever machine is selected will be utilized for the foreseeable future (in ad