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.