Part 1 discussion point: Why bonds?, bond issuance (bond offering) versus stock issuance from a corporate...
Part 1 discussion point:
Why bonds?, bond issuance (bond offering) versus stock issuance
from a corporate perspective in terms of capital need. In other
words, what are some of pros and cons of this two pathways of
corporate financing options? One, through "Debt Financing" as
opposed "Equity Financing"? Please also think about the related
concept of "Financial Leverage". Please discuss ups/downs (pros and
cons) between the two capital raising/structure.
Part 2 discussion point:
Now everything said and done with bonds, what is then difference
between bonds and loans (bonds vs. loans as long-term debt)? Please
discuss as many difference as you think of, from a corporation
perspective as well as from an investor/lender perspective.
Homework Answers
part1.
Bonds are debts while stocks are stakes of ownership in a company. the cost of debt is less than cos of equity. because debt fund will get a fixed rate of return while equity shareholders get dividend only when there is enough amount of profit. in capital structure we are not using equity or debt alone, instead company uses mix of both equity and capital. Financial leverage is the use of debt to buy additional asset. Normally company uses debt or bond instead of equity because of the following two reason.
1. The interest amount of bond can be deducted while calculating profit. it will reduce the amount of taxable profit.
2. The company has to pay only fixed rate of interest even if the company got very high profit.
Part2
The main difference between a bond and loan is that a bond is highly tradeable while the loan is usually fixed in original bank. we can sell and bought bond through bond market. so bond is more flexible as compare to loan. the rate of interest of bond is less as compare to loan. bond can be sold on bond market to public or financial institutions. but most loans are given by banks.
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Part 1 discussion point:
Why bonds?, bond issuance (bond offering) versus stock issuance
from a corporate...
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For each 5 part question, please read the argument carefully and
discuss why you agree or disagree with it. You must assess the
argument itself rather than other information such as occupations
of speakers. True or False question.
part 1)
part 2)
part 3)
part 4)
part 5)
Your friend, Bob, says ” The current gold price is $8 per ounce and the one-year forward gold price is $9 per ounce. If you buy gold now and sell...
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January 15, Year 4, and the date of payment will be January 30,
Year 4.
As an additional signal to the market, Terry’s management
repurchased 205,000 shares of Terry’s common stock on December 15,
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Terry uses the effective interest method to record the amortization
or premiums and discounts. Terry’s management has decided to report
net bonds on the balance sheet, instead of reporting the bond and
its premium or discount separately. No entries have yet been made
for the bond. Terry’s management would like to know the effect of
the sale...
Information: Using the money from their recent bond issue, Terry’s management has decided to declare an...
Information:
Using the money from their recent bond issue, Terry’s management
has decided to declare an additional $562,500 dividend. The date of
declaration is December 30, Year 3. The date of record will be
January 15, Year 4, and the date of payment will be January 30,
Year 4.
As an additional signal to the market, Terry’s management
repurchased 205,000 shares of Terry’s common stock on December 15,
Year 3 for $8.00 a share. Tax rate is 25%...
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Corporate Finance
For each 5 part question, please read the argument carefully and
discuss why you agree or disagree with it. You must assess the
argument itself rather than other information such as occupations
of speakers. True or False question.
part 1)
part 2)
part 3)
part 4)
part 5)
Your friend, Bob, says ” The current gold price is $8 per ounce and the one-year forward gold price is $9 per ounce. If you buy gold now and sell...
Using the money from their recent bond issue, Terry’s management
has decided to declare an additional $562,500 dividend. The date of
declaration is December 30, Year 3. The date of record will be
January 15, Year 4, and the date of payment will be January 30,
Year 4.
As an additional signal to the market, Terry’s management
repurchased 205,000 shares of Terry’s common stock on December 15,
Year 3 for $8.00 a share.
Terry’s management would like to know the...
On August 1, Terry issued a $1,600,000, semi-annual, 6 year,
4.5% bond. The market rate for similar bonds on that day was 5.0%.
Terry uses the effective interest method to record the amortization
or premiums and discounts. Terry’s management has decided to report
net bonds on the balance sheet, instead of reporting the bond and
its premium or discount separately. No entries have yet been made
for the bond. Terry’s management would like to know the effect of
the sale...
Information:
Using the money from their recent bond issue, Terry’s management
has decided to declare an additional $562,500 dividend. The date of
declaration is December 30, Year 3. The date of record will be
January 15, Year 4, and the date of payment will be January 30,
Year 4.
As an additional signal to the market, Terry’s management
repurchased 205,000 shares of Terry’s common stock on December 15,
Year 3 for $8.00 a share. Tax rate is 25%...
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