Reference no: EM131324941
After Dan's EFN analysis for East Coast Yachts (see the Closing Case in Chapter 3), Larissa has decided to expand the company's operations. She has asked Dan to enlist an underwriter to help sell $45 million in new 30-year bonds to finance new construction. Dan has entered into discussions with Renata Harper, an underwriter from the firm of Crowe & Mallard, about which bond features East Coast Yachts should consider and also what coupon rate the issue will likely have.
Dan is also considering whether to issue coupon-bearing bonds or zero coupon bonds. The YTM on either bond issue will be 5.5 percent. The coupon bond would have a 5.5 percent coupon rate. The company's tax rate is 35 percent.
QUESTIONS-
1. How many of the coupon bonds must East Coast Yachts issue to raise the $45 million? How many of the zeroes must it issue?
2. In 30 years, what will be the principal repayment due if East Coast Yachts issues the coupon bonds? What if it issues the zeroes?
3. What are the company's considerations in issuing a coupon bond compared to a zero coupon bond?
4. Suppose East Coast Yachts issues the coupon bonds with a make-whole call provision. The make-whole call rate is the Treasury rate plus .40 percent. If East Coast calls the bonds in seven years when the Treasury rate is 4.8 percent, what is the call price of the bond? What if it is 6.2 percent?
5. Are investors really made whole with a make-whole call provision?
6. After considering all the relevant factors, would you recommend a zero coupon issue or a regular coupon issue? Why? Would you recommend an ordinary call feature or a make-whole call feature? Why?
|
Discuss how the sec has influence
: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc - Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client?
|
|
Analyze the key concepts related to the talent pools
: Determine which performance management process you will employ to measure employee talent. Analyze the key concepts related to the talent pools and the talent review process. Develop appropriate talent management objectives to measure functional expe..
|
|
What are the total contributions of the charter flight
: Charter contracts are negotiable, and charter carriers receive many contract offers that do not promise $300 prices or 80-percent-full planes. Should the airline accept a charter flight proposal from a group that offers to guarantee the sale of 90..
|
|
Semi-annual bonds outstanding that mature
: The Fishing Pier has 6.30 percent, semi-annual bonds outstanding that mature in 12 years. The bonds have a face value of $1,000 and a market value of $1,017. What is the yield to maturity?
|
|
Issuing coupon bond compared to zero coupon bond
: After Dan's EFN analysis for East Coast Yachts (see the Closing Case in Chapter 3), Larissa has decided to expand the company's operations. She has asked Dan to enlist an underwriter to help sell $45 million in new 30-year bonds to finance new constr..
|
|
Write a rainfall program that stores the total rainfall
: Write a RainFall program that stores the total rainfall for each of 12 months into an array of doubles. Demonstrate program. Input Validation should not allow negative numbers.
|
|
What is sustainable growth rate
: What is the sustainable growth rate?
|
|
What else was going in america-around the world at the time
: Popular cultural is an important means of understanding any era in history. What people are watching, listening to, reading, making, and doing can tell us a lot about the time and society in which they lived the technology, the social norms, class..
|
|
What are some of negative implication of participatory media
: CMST 301- What are some of the negative implications of participatory media? Provide specific examples and cases. How has the increase in digital media resulted in an increase in ‘multi-tasking'?
|