2B5GG BURKE INDUSTRIES HAS A REVOLVING CREDIT ARRANGEMENT WITH ITS BA...
171.
CSO: 2B5f
LOS: 2B5gg
Burke Industries has a revolving credit arrangement with its bank which specifies that
Burke can borrow up to $5 million at an annual interest rate of 9% payable monthly. In
addition, Burke must pay a commitment fee of 0.25% per month on the unused portion of
the line, payable monthly. Burke expects to have a $2 million cash balance and no
borrowings against this line of credit on April 1, net cash inflows of $2 million in April,
net outflows of $7 million in May, and net inflows of $4 million in June. If all cash-
flows occur at the end of the month, approximately how much will Burke pay to the bank
during the second quarter related to this revolving credit arrangement?
a.
$47,700.
b.
$52,500.
c.
$60,200.
d.
$62,500.