Dry Supply Company Mini Case Study, continued Background Dry Supply and the bank agreed to the following terms:

Borrower: Dry Supply

Amount: $60,000

Purpose: purchase three new delivery vans

Rate: 6% fixed Term: five years

Repayment: Principal and interest monthly, based on 60-month amortization

Personal guarantee: Kaitlyn and Emily Nieson, owners Other conditions: No mergers or acquisitions without bank consent, debt-to-ratio will not exceed 2.5x, monthly internally prepared financial statements, annual reviewed financial statements prepared by an independent accounting firm.

Questions Based on the loan information above and your knowledge of Dry Supply, answer the following questions.

1. If the loan to Dry Supply is paid as agreed, what is the total interest the bank will earn on the loan?

2. What are some factors Anne Schippel likely considered when pricing the loan?

3. Anne Schippel anticipates that Dry Supply might request a floating rate instead of a fixed rate. Based on the principles in Chapter 8, what general guidance would you provide to Anne to help her prepare for the negotiation meeting?