What type of investor might be interested in participating

Reference no: EM13334445

a. Assume that Carson has two choices to satisfy the increased demand for its products. It could increase production by 10 percent with its existing facilities by obtaining short-term financing to cover the extra production expense and then using a portion of the revenue received to finance this level of production in the future. Alternatively, it could issue bonds and use the proceeds to buy a larger facility that would allow for 50 percent more capacity. Which alternative should Carson select?

b. Carson currently has a large amount of debt, and its assets have already been pledged to back up its existing debt. It does not have additional collateral. At this time, the credit risk premium it would pay is similar in the short-term and long-term debt markets. Does this imply that the cost of financing is the same in both markets?

c. Should Carson consider using a call provision if it issues bonds? Why? Why might Carson decide not to include a call provision on the bonds?

d. If Carson issues bonds, it would be a relatively small bond offering. Should Carson consider a private placement of bonds? What type of investor might be interested in participating in a private placement? Do you think Carson could offer the same yield on a private placement as it could on a public placement? Explain.

e. Financial institutions such as insurance companies and pension funds commonly purchase bonds. Explain the flow of funds that runs through these financial institutions and ultimately reaches corporations that issue bonds such as Carson Company.

Reference no: EM13334445

Questions Cloud

Explain acetic acid and methlyene blue : Doing a kinetics lab with HCL, Acetic Acid and Methlyene Blue. The reaction rate using spectrotophetry. Directions say to use the initial slope and divide by the extinction coefficient to get the reaction rate.

Determine whether the transactions is taxable : Determine whether each of the following transactions is taxable. If a transaction is not taxable, indicate what type of reorganization is affected, if any.

Calculate the freezing temperature of seawater : Derive a formula, similar to equation 5.90 which was T-Tnot = (nB*k*Tnot^2)/L for the shift in the freezing temperature of a dilute soution. calculate the freezing temperature of seawater

Determine the weight of the heaviest bear : The density of ice is 917 kg/m3, and the density of sea water is 1025 kg/m3. What is the weight of the heaviest bear that the ice can support without sinking completely beneath the water

What type of investor might be interested in participating : If Carson issues bonds, it would be a relatively small bond offering. Should Carson consider a private placement of bonds. What type of investor might be interested in participating in a private placement

Find the magnitude of the torque acting on the loop : A circular wire loop of radius 11.3 cm carries a current of 3.48 A. What is the magnitude of the torque acting on the loop

F is surjective is g ? f surjective : Suppose that f is surjective. Is g ? f surjective?

How long do we have before the sun runs out of fuel : Assuming that the distance between the Earth and the Sun is approximately 1.5E11 m, the mass of the sun is 1E31 g, how long do we have before the sun runs out of fuel

Define what is the equilibrium constant for the reaction : The standard free energy change for a chemical reaction is +21.9kJ/mole. what is the equilibrium constant for the reaction at 87 degrees?(R=8.314J/K mole.

User Account

All Pages