1-Suppose your firm is seeking a six-year, amortizing $700,000 loan with annual payments and your bank is offering you the choice between a $740,000 loan with a $40,000 compensating balance and a $700,000 loan without a compensating balance. The interest rate on the $700,000 loan is 9.0 percent. How low would the interest rate on the loan with the compensating balance have to be for you to choose it? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Interest rate %_______________

2-Suppose that Wall-E Corp. currently has the balance sheet shown below, and that sales for the year just ended were $6.5 million. The firm also has a profit margin of 25 percent, a retention ratio of 30 percent, and expects sales of $8.5 million next year. Fixed assets are currently fully utilized, and the nature of Wall-Es fixed assets is such that they must be added in $1 million increments.

Asset Liability

Current Asset 1,625,000 Fixed assets 4,225,000 Total Asset 5,850,000

Current liabilities 2,080,000 Long Term Liability 1,750,000 Equity 2,020,000 Total liability and Equity 5,850,000

If current assets and current liabilities are expected to grow with sales, what amount of additional funds will Wall-E need from external sources to fund the expected growth? (Enter your answer in dollars not in millions.) Additional funds needed $___________________