Zee Bank has received an application from one of its corporate customers for a one year interim financing of $40 million. The policy of Zee Bank is, over and above the evaluation on the creditworthiness of the borrower, the bank must receive at least a 5.0 percent per annum net return on any loans and credit facilities. The financial information on the interim facility are as follows:

The interest on the interim facility will be 5.5 percent per annum. The funding for the interim facility will come from an issuance of a one year Negotiable Certificate of Deposit at 3.0 percent per annum. The customer is required to maintain a compensating deposit of $4 million for the entire duration of the facility at 2.5 percent per annum interest.

Zee bank will also charge a commitment fee of 1.0 percent per annum on the facility in addition to a cash management fee of 4.0 percent per annum on the $40 million interim facility. On top of the funding cost, the administrative costs to the bank are the processing, monitoring and management costs which adds up to 2.0 percent of the interim facility.

You are required to.

(a)Conduct a customer profitability analysis (CPA) from the information provided above.