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1.Suppose that Zimbabwe has a choice of two possible $100 million, five- year Eurodollar loans. The first loan is offered at LIBOR + 1%
1.Suppose that Zimbabwe has a choice of two possible $100 million, five- year Eurodollar loans. The first loan is offered at LIBOR + 1% with a 2.5% syndication fee, whereas the second loan is price dat LIBOR + 1.5% and a 0.75% syndication fee. Assuming that Zimbabwe has a 9% cost of capital, which loan is preferable? Hint: View this as a capital budgeting problem. 1.Suppose that Zimbabwe has a choice of two possible $100 million, five- year Eurodollar loans. The first loan is offered at LIBOR + 1% with a 2.5% syndication fee, whereas the second loan is price dat LIBOR + 1.5% and a 0.75% syndication fee. Assuming that Zimbabwe has a 9% cost of capital, which loan is preferable? Hint: View this as a capital budgeting problem.
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Answer dollar cash flows associated with these two spread syndicate fee combinations are as follows Loan Option Fee Interest Spread Years 15Loan 1 25 ...Get Instant Access to Expert-Tailored Solutions
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