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Discuss pros and cons of issuing cp relative to borrowing

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Your company, large and currently with a good credit rating, needs $10 million for the next 5 years to finance a new long-term capital project. As a CFO, you are considering two financing alternatives: (a) issuing commercial paper (CP) with a maturity of 9 months (maximum) and rolling it over for the next 5 years; and (b) 5-year term loan at a fixed interest rate through an insurance company.

Problem 1: Discuss the pros and cons of issuing CP relative to borrowing the term loan to finance the new project. Assume that the corporate bond yield curve is currently a normal, upward slopping yield curve.

Reference no: EM132810828

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