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Art [367]
3 years ago
11

Scotch Inc. arranged a $7,000,000 revolving credit agreement with a group of banks. The firm paid an annual commitment fee of 0.

5% of the unused balance of the loan commitment. On the used portion of the revolver, it paid 1.5% above prime for the funds actually borrowed on a simple interest basis. The prime rate was 8% during the year.If the firm borrowed $6,000,000 immediately after the agreement was signed and repaid the loan at the end of one year, what was the total dollar annual cost of the revolver? Show your calculations, if any, and explain your answer.
Business
1 answer:
baherus [9]3 years ago
4 0

Answer:

$575,000

Explanation:

Data provided:

The total amount for the credit agreement = $7,000,000

The amount borrowed by the firm = $6,000,000

The annual commitment fee for the unused balance = 0.5%

Prime rate of interest = 8%

Interest paid above the prime rate = 1.5%

Now,

the unused amount = $7,000,000 - $6,000,000 = $1,000,000

The amount of commitment fees paid

= total unused amount × Annual commitment fees

= $1,000,000 × 0.005

= $5000

Total interest paid on the borrowed amount

= Amount borrowed × (prime rate + additional rate)

= $6,000,000 × ( 0.08 + 0.015)

= $6,000,000 × 0.095

= $570,000

Hence,

the total dollar annual cost of the revolver

=  interest paid on the borrowed amount + amount of commitment fees paid

= $570,000 + $5000

= $575,000

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Transfer

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2 years ago
Ben Ervin often experiences emotions in a much stronger manner than most of his other colleagues. Events that do not provoke any
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Answer:

E.

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3 years ago
Why do you think economists can be certain that every
Aleonysh [2.5K]

Answer:

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En el capítulo 2 definimos el crecimiento económico y presentamos distintas herramientas

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3 years ago
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Answer:

C. Bank interest payment

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Webster Corporation is preparing a master budget for the first quarter. The company budgets production of 2,960 units in January
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Answer:

$59,410

Explanation:

With regards to the above information, we need to calculate first, total number of units for first quarter of the year.

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But, each unit requires 0.5 hours of direct labor.

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= $59,410

Therefore, the budgeted direct labor cost for the first quarter of the year is $59,410

5 0
2 years ago
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