Estimate the duration of the firm projects

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Question: You are attempting to structure a debt issue for Eaton Corporation, a manufacturer of automotive components. You have collected the following information on the market values of debt and equity for the last ten years:

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In addition, you have the following information on the changes in long term interest rates, inflation rates, GNP, and exchange rates over the same period.

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Using this information,

a. Estimate the duration of this firm's projects. How would you use this information in designing the debt issue?

b. How cyclical is this company? How would that affect your debt issue?

c. Estimate the sensitivity of firm value to exchange rates. How would you use this information in designing the debt issue?

d. How sensitive is firm value to inflation rates? How would you use this information in designing the debt issue?

e. What factors might lead you to override the results of this analysis?

Reference no: EM131690219

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