Calculate the maximum amount of term B loan that can be borrowed against year 5 free cash flows, using assumptions below. No other debt tranches are present in the capital structure except for term loan A, B and C. Interest rate on amortizing term A loan, paid in cash Interest rate on bullet repayment term B loan, paid in cash Interest rate on bullet repayment term C loan, paid in cash Marginal tax rate Pre-tax interest Post tax interest Term (years) 5.0% 3.5% 6.0% 4.2% 7.0% 4.9% 30.0% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Free cash flows 100.0 106.0 110.0 113.0 115.0 116.0 Year 6 Year 7 Year 8 Year 9 117.0 118.0 119.0 120.0 4.0 5.0 6.0 Year 10 121.0

Calculate the maximum amount of term B loan that can be borrowed against year 5 free cash flows, using assumptions below. No other debt tranches are present in the capital structure except for term loan A, B and C. Interest rate on amortizing term A loan, paid in cash Interest rate on bullet repayment term B loan, paid in cash Interest rate on bullet repayment term C loan, paid in cash Marginal tax rate Pre-tax interest Post tax interest Term (years) 5.0% 3.5% 6.0% 4.2% 7.0% 4.9% 30.0% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Free cash flows 100.0 106.0 110.0 113.0 115.0 116.0 Year 6 Year 7 Year 8 Year 9 117.0 118.0 119.0 120.0 4.0 5.0 6.0 Year 10 121.0

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 7P: Effective Cost of Short-Term Credit Yonge Corporation must arrange financing for its working capital...

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