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BUSN 379 - Task I(1 For National Bank Prime bank loan...

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Task I: (1) For National Bank: Prime bank loan rate=3.25% http://research.stlouisfed.org/fred2/series/MPRIME? cid=117 So National first Interest rate=3.25%+6.75%=10% paid semiannually Hence, Effective Annual rate for National First = ((1+ (10%/2)) ^2)-1 =  10.25% For Regions Best: Interest rate=13.17% paid monthly Hence, Effective Annual Rate for Region's Best = ((1+ (13.17%/12)) ^12)-1 =  13.99% (2) Based on the above information it can be said that National First bank is the best choice because it has the lowest interest rate and choosing this would reduce the cost of debt for the company. (3) Given that, Loan amount=$6,950,000 APR=8.6% So monthly rate of interest=8.6%/12=0.72% Times to maturity=5 years So, number of monthly payment required=60 Hence, Monthly payment = $142,925.09 (Calculated using payment function in excel) Task II: (1) For Raytheon Co. (RTN): Stock Price=$46.69 Dividend paid=$0.31 Quarterly So, Annual Dividend payment=4*$0.31=$1.24 Dividend Growth=5% Hence, Required rate of return for Raytheon = (1.24/46.69)+5% =  7.66% For Boeing Co. (BA): Stock Price=$63.84
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Dividend paid=$0.42 Quarterly
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