Formal line of credit: Winegartner Cosmetics management is setting up a line of credit at the companys

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Formal line of credit: Winegartner Cosmetics management is setting up a line of credit at the company’s bank for $5 million for up to two years. The interest rate is 5.875 percent, and the loan agreement calls for an annual fee of 40 basis points on any unused balance for the year. If the firm borrows $2 million on the day the loan agreement is signed, what is the effective rate for the line of credit?

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Fundamentals Of Corporate Finance

ISBN: 9781119795438

5th Edition

Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates

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