Southview Hospital has a project looming in two years. While the hospital has launched a capital campaign
Question:
Southview Hospital has a project looming in two years. While the hospital has launched a capital campaign to fund the project, the builder is ready to start construction, and due to the harder financial times, the builder wants assurance that the hospital has all the money required to complete the project. The capital campaign will continue, but the hospital cannot guarantee how much money it will raise during the campaign, and the builder is requiring that the money is guaranteed. The hospital's CEO, CFO, and Chair of the Board of Trustees have met with the hospital's commercial bank representatives, and they have been offered two different options to secure the last $2,000,000 needed to fully fund the project. Option 1 is a traditional loan at a 4.25% annual interest rate and no closing costs and no early repayment penalties. Option 2 is a $2,000,000 committed line of credit that requires a $20,000 commitment fee and carries an interest rate of 5.75%.
Which option should the hospital take and why?
Vector Mechanics for Engineers Statics and Dynamics
ISBN: 978-0073212227
8th Edition
Authors: Ferdinand Beer, E. Russell Johnston, Jr., Elliot Eisenberg, William Clausen, David Mazurek, Phillip Cornwell