Dynamic Corporation has an existing loan in the amount of $5 million at an annual interest rate
Question:
Dynamic Corporation has an existing loan in the amount of $5 million at an annual interest rate of 5.9%. The company provides the bank with a financial statement prepared internally by the company under the loan agreement. Two competing banks have offered to replace Dynamic Corporation's existing loan agreement with a new one. Money Tree Bank has offered to lend Dynamic $5 million at a rate of 4.3%, but requires Dynamic to provide financial statements that have been reviewed by a CPA firm. Credit One Bank has offered to lend Dynamic $5 million at a rate of 3.5%, but requires Dynamic to provide financial statements that have been audited by a CPA firm. Dynamic Corporation's controller approached a CPA firm and was given an estimated cost of $28,
Requirement
Calculate Dynamic Corporation's annual costs under each loan agreement, including interest and the costs of the CPA firm's services. Indicate whether Dynamic should keep your current loan, accept Money Tree Bank's offer, or accept Credit One Bank's offer. Start by calculating the annual costs according to each loan agreement. requirement
Auditing And Assurance Services An Integrated Approach
ISBN: 9780135176146
17th Edition
Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley