Reference no: EM132472348

Point 1: According to a credit agreement with its bank, Kayak requires a minimum cash balance of $50,000 at each month-end. In return, the bank has agreed that the company can borrow up to $150,000 at a monthly interest rate of 1%, paid on the last day of each month. The interest is computed based on the beginning balance of the loan for the month. The company repays loan principal with any cash in excess of $50,000 on the last day of each month. The company has a cash balance of $50,000 and a loan balance of $100,000 at January 1.

Question 1: If the loan balance was 48,900 at end of January, then the loan balance for February is only 48,900 plus interest. Interest is 489.So have 101,611 in preliminary cash balance, additional loan payment would be anything in excess of 50,000. But since there is only 48,900 plus 489, is that the loan repayment cost?