Question Help Dunder Corporation has an existing loan in the amount of $10 million with an...
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Question Help Dunder Corporation has an existing loan in the amount of $10 million with an annual interest rate of 6.1%. The company provides an internal company-prepared financial statement to the bank under the loan agreement. Two competing banks have offered to replace Dunder Corporation's existing loan agreement with a new one. More Money Bank has offered to loan Dunder $10 million at a rate of 5.1% but requires Dunder to provide financial statements that have been reviewed by a CPA firm. Green Back Bank has offered to loan Dunder $10 million at a rate of 4.3% 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 $28,000 to perform a review and $68,000 to perform an audit. Read the fequirements. (Enter amounts in dollars, not millions, throughout.) Requirement a. Explain why the interest rate for the loan that requires a review report is lower than that for the loan that does not require a review. Explain why the interest rate for the loan that requires an audit report is lower than the interest rate for the other two loans. information risk. A review raport provides assurance and thus lower information rak The interest rate for the loan that requires a review report is lower than the loan that does not require a review because of the lower moderate assurance to financial statement users. Compared to a review report, an audit provides further for the loan with the audit report As a result, the interest rate is lowest 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 More Money Bank, or accept the offer from Green Back Bank. Begin by calculating the annual costs under each loan agreement (Complete all input fields. Enter a "0" for any zero balances.) Lender Cost of CPA Services Annual Interest Annual Loan Cost Existing loan (No CPA service) More Money Bank (CPA Review service) Green Back Bank (CPA Audit service) Enter any number in the edit fields and then click Check Answer. Question Help Dunder Corporation has an existing loan in the amount of $10 million with an annual interest rate of 6.1%. The company provides an internal company-prepared financial statement to the bank under the loan agreement. Two competing banks have offered to replace Dunder Corporation's existing loan agreement with a new one. More Money Bank has offered to loan Dunder $10 million at a rate of 5.1% but requires Dunder to provide financial statements that have been reviewed by a CPA firm. Green Back Bank has offered to loan Dunder $10 million at a rate of 4.3% 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 $28,000 to perform a review and $68,000 to perform an audit. Read the fequirements. (Enter amounts in dollars, not millions, throughout.) Requirement a. Explain why the interest rate for the loan that requires a review report is lower than that for the loan that does not require a review. Explain why the interest rate for the loan that requires an audit report is lower than the interest rate for the other two loans. information risk. A review raport provides assurance and thus lower information rak The interest rate for the loan that requires a review report is lower than the loan that does not require a review because of the lower moderate assurance to financial statement users. Compared to a review report, an audit provides further for the loan with the audit report As a result, the interest rate is lowest 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 More Money Bank, or accept the offer from Green Back Bank. Begin by calculating the annual costs under each loan agreement (Complete all input fields. Enter a "0" for any zero balances.) Lender Cost of CPA Services Annual Interest Annual Loan Cost Existing loan (No CPA service) More Money Bank (CPA Review service) Green Back Bank (CPA Audit service) Enter any number in the edit fields and then click Check Answer.
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