Determine the annual financing cost of borrowing

Assignment Help Financial Management

Reference no: EM13927099

The Vandergrift Company has a revolving credit agreement with Commerce Bank under which the company can borrow up to $5 million at an annual interest rate of 1 percentage point above the prime rate (currently 9 percent). The company is required to maintain a 10 percent compensating balance on any funds borrowed under the agreement and to pay a 0.4 percent commitment fee on the unused portion of the credit line. Assume that Vandergrift has no funds in its account at Commerce Bank that can be used to meet the compensating balance requirement. Determine the annual financing cost of borrowing each of the following amounts under the credit agreement:

a. $1 million

b. $4 million.

Reference no: EM13927099

Questions Cloud

Determine the annual financing cost of the loan : Determine the annual financing cost of the loan under each of the following conditions Kittanning currently maintains $100,000 in its account at the bank that can be used to meet the compensating balance requirement.

Interaction between organizations : Systems theory proposes open interaction between organizations and their environments. In doing so firms engage in external business development activities, often referred to as external corporate venturing, in addition to developing their own abs..

Most responsible for that crisis : The Enron debacle created what one public official reported was a "crisis of confidence" on the part of the public in the accounting profession. List the parties who you believe are most responsible for that crisis. Briefly justify each of your ch..

Estimate the supply and demand curves for cigarettes : A country which does not tax cigarettes is considering the introduction of a $0.40 per pack tax. The economic advisors to the country estimate the supply and demand curves for cigarettes as:

Determine the annual financing cost of borrowing : Determine the annual financing cost of borrowing each of the following amounts under the credit agreement $1 million and $4 million.

Emerged in the early modern age : This word describes the new spirit of questioning that emerged in the early modern age.

Create a logic model that depicts your organization : Create a logic model that depicts your organization and what you, as a leader, would do to address the issues, Identify the skills and resources a leader would need to bring about the proposed changes in your model in an ethical way

Assignment on economic policy recommendation : Select an economic problem mentioned in the textbook as the topic for a policy recommendation. Write a six to eight (6-8) page paper modeled as a policy recommendation in which you:

Payable requires payment of the amount borrowed plus : A note payable requires payment of the amount borrowed plus

User Account

All Pages