1.) Matthews Manufacturing is negotiating a 1-year credit line with its bank, Worldwide Bank. The amount of the credit line is $5.5 million with an interest rate set at 1.5% above the prime rate. A commitment fee of 1.5% (150 basis points) will be charged on the unused portion of the line. No compensating balances are required, and the loan is made on a 365-day basis.

a.) If the prime rate is assumed to be constant at 4.75% during the term of the loan and if Matthews's average loan outstanding during the year is $5 million, then calculate the firm's effective borrowing rate. Round your answer to two decimal places.

b.) What effect would an increase in the prime rate to 5.25% for the entire year have on Matthews's EBR calculated in part (a)? Round your answer to two decimal places. Change is______%

c.) What effect would a decrease in Matthews's average loan outstanding during the year to $4 million have on the EBR calculated in part (a)? Round your answer to two decimal places. Change is _____%

2.)

LaJolla Securities Inc. specializes in the underwriting of small companies. The terms of a recent offering were as follows:

Number of shares	2 million
Offering price	$25 per share
Net proceeds	$45 million

LaJolla Securities' expenses associated with the offering were $500,000. Determine LaJolla Securities' profit on the offering if the secondary market price of the shares immediately after the offering began were as follows:

a.) $22 Per share = ________ million

b.) $25 Per Share =_________ million

c.) $30 Per Share = _________ Million

3.) After a banner year of rising profits and positive stock returns, the managers of Raptor Pharmaceuticals Corporation (RPC) have decided to launch a seasoned equity offering to raise new equity capital. RPC currently has 15 million shares outstanding, and yesterday's closing market price was $60.00 per RPC share. The company plans to sell 1 million newly issued shares in its seasoned offering. The investment banking firm Robbum and Blindum (R&B) has agreed to underwrite the new stock issue for a 3.5% discount from the offering price, which RPC and R&B have agreed should be $0.20 per share lower than RPC's closing price the day before the offering is sold.

a.) What is likely to happen to RPC's stock price when the plan for this seasoned offering is publicly announced (Mention that seasoned equity issue announcements usually cause the stock price to fall by about 3 percent)? RPC's announcement of its planned offering would cause the stock price to Increase/Decrease from $_____ to $______

b.) Assuming that RPC's stock price closes at $58.20 per share the day before the seasoned offering is launched, what net proceeds will RPC receive from this offering?

c.) Calculate the return earned by RPC's existing stockholders on their shares from the time before the seasoned offering was announced until it was actually sold for $58.20 per share. Round your answer to two decimal places.

d.) Calculate the total cost of the seasoned equity offering to RPC's existing stockholders as a percentage of the offering proceeds. Round your answer to two decimal places.