Siemens AG, the large German electronics company, is looking to raise Us$500 million for the next...
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Siemens AG, the large German electronics company, is looking to raise Us$500 million for the next five years. Bank of America and Deutsche Bank have come up with competing bids for the mandate to syndicate a $500 million Eurodollar loan for Siemens. Their proposals are as follows: Bank of America proposal Deutsche Bank proposal $0.5 billion Principal Maturity Reset period Interest $0.5 billion 5 years 5 years LIBOR + 0.25% LIBOR + 0.375% Every six Every six rate months months Syndication fee 1.125% 0.75% 1. What are the net proceeds to Siemens from each of these syndicated loan proposals? 2. Assuming that six-month LIBOR is currently at 4.35%, what is the effective annual interest cost to Siemens for the first six months of each loan? 3. Which of these two loans would you select on the basis of cost, all else being equal? 4. What other factors might you consider in deciding between these two loan proposals? Siemens AG, the large German electronics company, is looking to raise Us$500 million for the next five years. Bank of America and Deutsche Bank have come up with competing bids for the mandate to syndicate a $500 million Eurodollar loan for Siemens. Their proposals are as follows: Bank of America proposal Deutsche Bank proposal $0.5 billion Principal Maturity Reset period Interest $0.5 billion 5 years 5 years LIBOR + 0.25% LIBOR + 0.375% Every six Every six rate months months Syndication fee 1.125% 0.75% 1. What are the net proceeds to Siemens from each of these syndicated loan proposals? 2. Assuming that six-month LIBOR is currently at 4.35%, what is the effective annual interest cost to Siemens for the first six months of each loan? 3. Which of these two loans would you select on the basis of cost, all else being equal? 4. What other factors might you consider in deciding between these two loan proposals?
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Answer Step by Step Explanation 1 The net proceeds are Bank of America 5000000... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
Posted Date:
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