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Dunder Corporation has an existing loan in the amount of $8 million with an annual interest rate of 6.0%. The company provides an internal company-prepared
Dunder Corporation has an existing loan in the amount of $8 million with an annual interest rate of 6.0%. The company provides an internal company-prepared financial statement to the bank under the loan agreement. Two competing bank have offered to replace Dunder Corporation's existing loan agreement with a new one. Sunset Lending Bank has offere to loan Dunder $8 million at a rate of 5.2% but requires Dunder to provide financial statements that have been reviewed by a CPA firm. Big Top Bank has offered to loan Dunder $8 million at a rate of 4.4% but requires Dunder to provide financial statements that have been audited by a CPA firm. Dunder Corporation's controller approached a CPA firm and was given an estimated cost of $29,000 to perform a review and $51,000 to perform an audit. Read the (Enter amounts in dollars, not millions, throughout.) of the information risk. A review report provides assurance to financial statement users. Compared to a review report, an audit provides assurance and thus information risk. As a result, the interest rate is for the loan with the audit report. Requirement b. Calculate Dunder Corporation's annual costs under each loan agreement, including interest and costs for the CPA firm's services. Indicate whether Dunder should keep its existing loan, accept the offer from Sunset Lending Bank, or accept the offer from Big Top 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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