How much does heather save or cost her company

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O'Reilly and CB Solutions. Heather? O'Reilly, the treasurer of CB? Solutions, believes interest rates are going to? rise, so she wants to swap her future? floating-rate interest payments for fixed rates.? Presently, she is paying LIBOR? +2% per annum on$5,100,000 of debt for the next two? years, with payments due semiannually. LIBOR is currently 3.98 ?% per annum. Heather has just made an interest payment? today, so the next payment is due six months from now. Heather finds that she can swap her current? floating-rate payments for fixed payments of 7.005 ?% per annum. ? (CB Solutions' weighted average cost of capital 12 is ?%, which Heather calculates to be 6?% per? 6-month period, compounded? semiannually).

a. If LIBOR rises at the rate 50 of basis points per? 6-month period, starting? tomorrow, how much does Heather save or cost her company by making this? swap?

b. If LIBOR falls at the rate of 50 basis points per? 6-month period, starting? tomorrow, how much does Heather save or cost her company by making this? swap?

Reference no: EM132622513

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