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Which option is cheaper for pickard and renot

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Reference no: EM133073462

Calculate the yield of the 3 debt alternatives assuming the market values of all three debt instruments are at par:

  • Base: Mezzanine debt, 0% cash interest and 15% PIK interest for five years
  • Alternative 1: Mezzanine debt, 7% cash interest and 8% PIK interest for five years
  • Alternative 2: Junior loan for five years, 13% annual interest paid in cash and payment of 20% of the principal per year

Which option is cheaper for Pickard and Renot? Can they repay the debt and interest with the cash flow from the company?

Reference no: EM133073462

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