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What are main risks to the bank in lending money to pipes

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Reference no: EM133044197

Question - From the Text Book - Lessons in Corporate Finance: A case Studies Approach to Financial Tools, Financial Policies, and Valuation, 2nd Edition, Paul Asquith, Lawrence A. Weiss: E-Book ISBN 978-1-119-53789-2 Wiley April 2019. Case Studies in Finance, 8th Edition, Robert Bruner and Kenneth Eades; Loose Leaf ISBN10: 1260427579; McGraw Hill, 2018.

PIPEP is considering applying for a bank loan after reading case 3 answer the following questions.

1. What are the main risks to the bank in lending money to PIPES?

2. Why might PIPES default on the loan?

3. What happens to PIPES if there is an economic downturn?

4. What happens if competitors come in, for instance, if a large box store like Home Depot opens across the street and puts PIPES out of business?

5. How good is the collateral (the value of the receivables, inventory, and fixed assets) with which PIPES can cover the loan?

6. What would PIPES's assets be worth if liquidated under distress? What is the collateral?

Reference no: EM133044197

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