TECHNOTHERM CORPORATION was founded in 1972 by bringing together a skilled professional team established in the...
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TECHNOTHERM CORPORATION was founded in 1972 by bringing together a skilled professional team established in the field of waste heat recovery. Technotherm just executed a 3 year contract with the State of Germany to deliver (10) Firetube Boilers to a state-owned entity. Each Boiler Technotherm constructs can be built in Belgium or Tulsa, OK. The cost of manufacturing is €2,750,000. The terms of the contract specify that Technotherm must accept payment for the Boilers in Euro, which isn't a problem because Technotherm maintains a multi-currency account in London and it holds plenty of €. It will take Technotherm 3 years to complete the construction and delivery of the Boilers. Technotherm's CFO looked up the conversion rates of €/$ for today and in 3 years. The Spot €/$ rate is 1.05476 and the 3yr Forward is 1.10757. Also, the CFO checked the 30-day and 90-day LIBOR rates, which are 4.22% and 4.73% respectively. Three year SWAP rates are 3.84% for 30-day LIBOR and 4.83% for 90 day LIBOR. Technotherm must borrow finance the construction of the Boilers. The company has two financing options: USBANK: 1.75% of the cost of manufacturing 2. Interest only per annum, paid in monthly payments 3. Rate Options: a. 30 DAY LIBOR + 6% b. 10% FIXED FOR 3 YEARS DEUTCHE BANK: 1. 80% of the cost of manufacturing 2. Interest only per annum, paid in quarterly payments 3. Rate Options: a. 90 DAY LIBOR +5% b. 9% FIXED FOR 3 YEARS As a new graduate of the Meinders School of Business, you report to the CFO and are assigned to use the data above to answer the following question: 1. What is the loan amount with USBANK? TECHNOTHERM CORPORATION was founded in 1972 by bringing together a skilled professional team established in the field of waste heat recovery. Technotherm just executed a 3 year contract with the State of Germany to deliver (10) Firetube Boilers to a state-owned entity. Each Boiler Technotherm constructs can be built in Belgium or Tulsa, OK. The cost of manufacturing is €2,750,000. The terms of the contract specify that Technotherm must accept payment for the Boilers in Euro, which isn't a problem because Technotherm maintains a multi-currency account in London and it holds plenty of €. It will take Technotherm 3 years to complete the construction and delivery of the Boilers. Technotherm's CFO looked up the conversion rates of €/$ for today and in 3 years. The Spot €/$ rate is 1.05476 and the 3yr Forward is 1.10757. Also, the CFO checked the 30-day and 90-day LIBOR rates, which are 4.22% and 4.73% respectively. Three year SWAP rates are 3.84% for 30-day LIBOR and 4.83% for 90 day LIBOR. Technotherm must borrow finance the construction of the Boilers. The company has two financing options: USBANK: 1.75% of the cost of manufacturing 2. Interest only per annum, paid in monthly payments 3. Rate Options: a. 30 DAY LIBOR + 6% b. 10% FIXED FOR 3 YEARS DEUTCHE BANK: 1. 80% of the cost of manufacturing 2. Interest only per annum, paid in quarterly payments 3. Rate Options: a. 90 DAY LIBOR +5% b. 9% FIXED FOR 3 YEARS As a new graduate of the Meinders School of Business, you report to the CFO and are assigned to use the data above to answer the following question: 1. What is the loan amount with USBANK?
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Related Book For
Auditing a business risk appraoch
ISBN: 978-0324375589
6th Edition
Authors: larry e. rittenberg, bradley j. schwieger, karla m. johnston
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