Managers at a large firm are looking for medium-size loan with a long term to maturity...
- Managers at a large firm are looking for medium-size loan with a long term to maturity and low liquidity. Which of the following types of debt would be the most appropriate:
a. Public bond
b. Private placement
c. Bank term loan
Homework Answers
Bank term loans are issued by a bank and have long-term repayment plans – typically extending beyond one year. These loans normally come with fixed interest rates,
the answer is c. Bank term loan
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Managers at a large firm are looking for medium-size loan with
a long term to maturity...
Short term Financing 1) Your firm issues 20-year bonds. This type of financing would be most...
Short term Financing 1) Your firm issues 20-year bonds. This type of financing would be most appropriate for which of the following activities? A) The support of accounts receivable B) The construction of a new warehouse C) The support of accounts payable D) The financing of inventory 2) Your firm borrows money from the bank on a short-term note due in 9 months. This type of financing would be most appropriate for which of the following activities? A) The support...
2. Types of short-term bonds Short-term debt securities have a maturity of one year or less....
2. Types of short-term bonds Short-term debt securities have a maturity of one year or less. The characteristics of the debt securities will depend upon the capital n borrower and the investment needs of the lender. In the following table, identify the term that best matches each type of short-term d being described Definit Term Tiger Telecommunications Company needs to borrow $1 million overnight and is willing to secure the loan with a portfolio of securities that the borrower will...
Blank response answer choices: 1) assets other than the equipment bought / the equipment itself 2)...
Blank response answer choices:
1) assets other than the equipment bought / the equipment
itself
2) lower earnings that will decrease / higher earnings that will
increase
3) issue a public offering of long-term bonds / get a term loan
or a private placement
Along with decisions about optimal debt structure, firms need to decide on the kind of maturities the debt in their capital structure should have. There are several factors that affect the choice of maturity structure. Based...
13. Short-term versus long-term financing Generally speaking, short-term debt is riskier than long-term debt, but it...
13. Short-term versus long-term financing Generally speaking, short-term debt is riskier than long-term debt, but it also has some advantages. In the following table, identify which type of funding (short-term debt or long-term debt) is being described in each case. Short-term Debt Long-term Debt This loan has more covenants that restrict the firm's actions. This loan is more flexible and can be used to adapt to changing market conditions. The lender will insist on a more thorough financial examination before...
Company A, a low-rated firm, desires a fixed-rate, long-term loan. A currently has access to floating...
Company A, a low-rated firm, desires a fixed-rate, long-term loan. A currently has access to floating interest rate funds at a margin of 0.5% over LIBOR. Its direct borrowing cost is 13% in the fixed-rate bond market. In contrast, company B, which prefers a floating-rate loan, has access to fixed-rate funds in the Eurodollar bond market at 11% and floating rate funds al LIBOR + 1.5% How can A and B use a swap to advantage?
11) Which of the following is a characteristic of a balloon loan? A) Prior to maturity,...
11) Which of the following is a characteristic of a balloon loan? A) Prior to maturity, the borrower only pays interest (usually monthly). B) The loan is typically 10 - 15 years in maturity. C) At maturity, the entire loan amount is due. D) All of the above are true. E) Only A and C of the above are true. 12) Which of the following protects the mortgage lender's right to sell property if the underlying loan defaults? A) A...
Strategy and the Firm Managers make a number of choices that affect the long-term health of an...
Strategy and the Firm Managers make a number of choices that affect the long-term health of an organization. These choices include the basic strategies the firm will develop and execute about operations, and choices about the organization of the firm. Understanding the issues underlying the choices will help the manager make better decisions. To maximize the value of the firm, managers must pursue strategies that increase the profitability of the enterprise and its rate of profit growth over time. Managers can increase...
When the loan is first obtained, $300,000 will be posted in the long- term debt account...
When the loan is first obtained, $300,000 will be posted in
the long- term debt account and will appear on the balance sheet.
At the end of the first year, Sunnyvale will pay the bank a total
of $130,000, consisting of $30,000 interest on the loan and
$100,000 repayment on the principal portion of the loan. The
$30,000 interest expense, which is paid to the bank for the use of
its money, appears as an expense on the income statement....
You want to calculate the cost of debt for a firm with bank debt and long-term...
You want to calculate the cost of debt for a firm with bank debt and long-term bond outstanding. The $100 million revolving line of credit is priced at 1ibor + 250 basis points and with $25 million utilized. The company has a $150 million 5-year bond that pays interest semi-annually. The bond has an 8% coupon$1,000 par value and is currently priced at 98.5 as a percent of par. The Libor reference rate is currently 0.50%. What is the blended...
2) Your firm borrows money from the bank on a short-term note due in 9 months....
2) Your firm borrows money from the bank on a short-term note due in 9 months. This type of financing would be most appropriate for which of the following activities? A) The support of accounts receivable B) The construction of a new warehouse C) The support of accounts payable D) The financing of new equity 3) Which of the following is NOT considered a source of short-term financing? A) a 10-year bond B) a banker's acceptance C) a 90-day bank...
2. Types of short-term bonds Short-term debt securities have a maturity of one year or less. The characteristics of the debt securities will depend upon the capital n borrower and the investment needs of the lender. In the following table, identify the term that best matches each type of short-term d being described Definit Term Tiger Telecommunications Company needs to borrow $1 million overnight and is willing to secure the loan with a portfolio of securities that the borrower will...
Blank response answer choices:
1) assets other than the equipment bought / the equipment
itself
2) lower earnings that will decrease / higher earnings that will
increase
3) issue a public offering of long-term bonds / get a term loan
or a private placement
Along with decisions about optimal debt structure, firms need to decide on the kind of maturities the debt in their capital structure should have. There are several factors that affect the choice of maturity structure. Based...
13. Short-term versus long-term financing Generally speaking, short-term debt is riskier than long-term debt, but it also has some advantages. In the following table, identify which type of funding (short-term debt or long-term debt) is being described in each case. Short-term Debt Long-term Debt This loan has more covenants that restrict the firm's actions. This loan is more flexible and can be used to adapt to changing market conditions. The lender will insist on a more thorough financial examination before...
Strategy and the Firm Managers make a number of choices that affect the long-term health of an organization. These choices include the basic strategies the firm will develop and execute about operations, and choices about the organization of the firm. Understanding the issues underlying the choices will help the manager make better decisions. To maximize the value of the firm, managers must pursue strategies that increase the profitability of the enterprise and its rate of profit growth over time. Managers can increase...
When the loan is first obtained, $300,000 will be posted in
the long- term debt account and will appear on the balance sheet.
At the end of the first year, Sunnyvale will pay the bank a total
of $130,000, consisting of $30,000 interest on the loan and
$100,000 repayment on the principal portion of the loan. The
$30,000 interest expense, which is paid to the bank for the use of
its money, appears as an expense on the income statement....
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