Question

24. During lecture we illustrated how the profitability of different types of companies can change as the economy moves through a business cycle of 7-10 years. A company like Molson-Coors Brewing Company (which trades under the ticker TAP) would best be described as a When economic conditions deteriorate (e.g. during the housing crisis), TAP's operating margin would most likely a. non-cyclical company b. cyclical company C. non-cyclical company d. cyclical company e. non-cyclical company increase significantly decrease significantly decrease significantly remain the same remain the same 25. A creditor is willing to offer you $5,000 today in the form of a pure discount loan, an interest only loan, or an amortizing loan. Each loan is for an 8 year period where you will pay interest one time per year (if applicable). While you are willing to pay the creditor annual interest, you do not want to return any of the $5,000 in principle for 8 years. You would also prefer to pay as little interest over the lifetime of the loan as possible. The best loan (s) for you to choose (if any) would be the: a. The pure discount loan b. The interest only loan c. The amortizing loan d. None of the loans satisfy your constraints e. Any of loans would work as they are all for the same amount of money

Answer 1

1) Impact of business cycle on any company depends on the type of business it is dealing with as some companies are inflation friendly others do not impact by economic conditions like alcohol, or involved in production of beers(brewery) as these do not represent luxury products so there consumption will not change so

It is CYCLICAL company and its operating margin REMAIN THE SAME though it may change but not that much.

2) None of the loans satisfy my constraints as all the loans require payment of principal for ex

• Pure loan requires payment of principal after its expiry
• Interest only loan pays interest for some period but after that period we need to make payment of principal
• Amortizing loan requires payment of interest and principal both every time .

so none of the loan can fulfill this constraint