What is SONJ net operating working capital

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Reference no: EM132722637

Question - SONJ is considering earning some interest on the settlement funds by purchasing 50 3-year bonds that have a par value of $1,000.00 with annual coupon payments of $65.00, at a price of $1050.00 each.

SONJ also has the option to purchase 50 3-year bonds that have a par value of $1,000.00 and annual coupon payment of $65.00. However, the market interest rate is 8%.

Another option for SONJ to raise funds is to issue stock. The risk-free rate is 4%, while the market risk premium is 7%.

What is SONJ's net operating working capital? What would you recommend as the best way to increase it? Explain your recommendation.

What is SONJ's debt-to-capital ratio and what is its current ratio? How much would you be willing to increase the debt-to-capital ratio and why? How much would you be willing to decrease the current ratio and why? Explain your recommendations.

If the settlement funds are to be used for the expansion, which settlement is preferable? Be sure to support you answer with specific calculations and explanations.

What is the first bond purchase's yield to maturity? What is the second bond purchase's price? How will this help SONJ?

Which bonds should SONJ purchase? Explain your response.

What is the required rate of return for an investor in SONJ if it has a beta of 1.3?

Does the required rate of return for buying SONJ stock increase or decrease in direct proportion to SONJ's beta? Explain your answer in detail.

What specific steps might SONJ take to analyze its potential expansion project?

What are the three types of project risk SONJ might face? Explain each and how they apply to SONJ.

What are SONJ's real options? List and describe each.

Reference no: EM132722637

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