Firm G has a committed credit line in the amount of $5,000,000. The interest rate on the
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Question:
Firm G has a committed credit line in the amount of $5,000,000. The interest rate on the credit line is 4.75%, the commitment fee is 0.35%, and the compensating balance is 10%. The treasurer of Firm G believes that the firm will require average daily borrowings of $4,200,000. To spend $4,200,000 from the line, how much must be drawn from the line?
Suppose that Firm G borrows the amount calculated in Question 11. What is the annual interest expense?
What is the commitment fee?
What is the effective cost of the line?
Related Book For
Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay
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