One stop can expect to pay on this loan commitment

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Reference no: EM132004400

1. DiPitro’s Paint and Wallpaper, Inc., needs to raise $1.11 million to finance plant expansion. In discussions with its investment bank, DiPitro’s learns that the bankers recommend a debt issue with gross proceeds of $1,000 per bond and they will charge an underwriter’s spread of 4.5 percent of the gross proceeds.

How many bonds will DiPitro’s Paint and Wallpaper need to sell in order to receive the $1.11 million it needs?

2. Casey’s One Stop has been approved for a $257,500 loan commitment from its local bank. The bank has offered the following terms: term = one year, up-front fee = 50 basis points, back-end fee = 25 basis points, and rate on the loan = 7.25 percent. Casey’s expects to immediately take down $247,000 and no more during the year unless there is some unforeseen need. Calculate the total interest and fees Casey’s One Stop can expect to pay on this loan commitment.

Reference no: EM132004400

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