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The company provides an internal company-prepared financial statement to the sank under the loan agreement. Two competing banks have offered to replace Junder Corporation's existing
The company provides an internal company-prepared financial statement to the sank under the loan agreement. Two competing banks have offered to replace Junder Corporation's existing loan agreement with a new one. Money Tree Bank las offered to loan Dunder $6 million at a rate of 5.0% but requires Dunder to rovide financial statements that have been reviewed by a CPA firm. Big Top Bank has offered to loan Dunder $6 million at a rate of 3.8% but requires Dunder to orovide 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 $34,000 to perform a review and $49,000 to perform an audit. Requirement c. Assume that Money Tree Bank has offered the loan at a rate of 5.0% with a review, and the cost of the audit has increased to $109,000 due to new auditing standards requirements. Indicate whether Dunder should keep its existing loan, accept the offer from Money Tree 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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