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Definition The company provides an internal company-prepared financial statement to the bank under the loan agreement. Two competing banks have offered to replace Dynamic Corporation's
Definition The company provides an internal company-prepared financial statement to the bank under the loan agreement. Two competing banks have offered to replace Dynamic Corporation's existing loan agreement with a new one. Credit One Bank has offered to loan Dynamic $8 million at a rate of 5.3% but requires Dynamic to provide financial statements that have been reviewed by a CPA firm. Earn More Bank has offered to loan Dynamic $8 million at a rate of 4.3% but requires Dynamic to provide financial statements that have been audited by a CPA firm. Dynamic Corporation's controller approached a CPA firm and was given an estimated cost of $35,000 to perform a review and $65,000 to perform an audit. Requirement c. Assume that Credit One Bank has offered the loan at a rate of 5.3% with a review, and the cost of the audit has increased to $145,000 due to new auditing standards requirements. Indicate whether Dynamic should keep its existing loan, accept the offer from Credit One Bank, or accept the offer from Earn More Bank. Begin by calculating the annual costs under each loan agreement. (Complete all input fields. Enter a " 0 " for any zero balances.)
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