1. Suppose a firm has a retention ratio of 45 percent and net income of $3.2 million. How much does it pay out in dividends?
2. You have approached your local bank for a start-up loan commitment for $2,600,000 needed to open an auto repair store. You have requested that the term of the loan be one-year. Your bank has offered you the following terms: size of loan commitment = $2,600,000, term = 1 year, up-front fee = 30 basis points, back-end fee = 50 basis points. If you take down 90 percent of the total loan commitment, calculate the total fees you have paid on this loan commitment.
3. During the last year you have had a loan commitment from your bank to fund inventory purchases for your small business. The total loan available was $1,130,000, of which you took down $880,000. It is now the end of the loan commitment period and your bank is asking you to pay the back-end fees. You have misplaced the paperwork that listed the terms of the commitment, but you know you paid total fees (this does not include any interest paid to borrow the $880,000) of $7,275 on this loan commitment. You remember that the up-front fee was 50 basis points, what is the back-end fee on this loan commitment.