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You are the CFO of Diversi?ed Industries. Diversi?ed has suffered through 4 or 5 tough years. This has deteriorated its ? financial condition to the point that Diversi?ed is in danger of violating two loan covenants related to its largest loan, which is not due for 12 more years. The loan con-tract states that if Diversi?ed violates any of these covenants, the loan principal becomes immediately due and payable. Diversi?ed would be unable to make this payment, and any additional loans taken to repay this loan would likely be at higher rates, forcing Diversi?ed into bankruptcy. An investment banker suggests forming another entity (called ‘‘special purpose entities'' or SPE) and transferring some debt to this SPE. Structuring the SPE very carefully will have the effect of moving enough debt off Diversi?ed's balance sheet to keep the company in compliance with all its loan covenants. The investment banker assures you that accounting rules permit such accounting treatment. Required: How do you react to the investment banker?
A company is considering investing some independent proposals, The proposals with their expected net present values and standard deviations are given in the following table.
Using CAPM's formula, Return on equity = Risk-free rate + Beta*(Expected market return - risk-free rate) With the given information, Return on equity = 1% + 0.55*(8% - 1%)
The common stock of the PP Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out that range in the next 3 mont
Q. What is basic defination of FCA? Yes. FCA is a method of accounting for all financial costs of funds used or committed for municipal solid waste (MSW) services. FCA suggests
What is the financial objective of a business A business is created to enhance wealth of its owners. This may come as a surprise, as there are other objectives which a business
SYSTEM ONE-THE HEAD OFFICE MAINTAINS ALL THE ACCOUNTS This system is suitable for an enterprise that has small branches (possibly in another area of the town or city where the
Cherry Ltd has the following segment information from the consolidated financial statements for the years ended 31 December 2011 and 2012: Operating segments C V I N$ N$ N$ Sales
Q. Chrissy currently has a credit card that charges 15 percent interest. She usually carries a balance of about $500. Chrissy has received an offer for a new credit card with a tea
Foley Corporation has the following capital structure at the beginning of the year: 6% Preferred stock, $50 par value, 20,000 shares authorized, 6,000 shares issued and outstanding
Realisation of assets 1. Divisible property : The ownership of the company's property does not vest in the liquidator (unless the court makes a vesting order: s.240); but
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