PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 24, Problem 23PS
Summary Introduction
To determine: The good and poor collateral in each cases.
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You are a credit analyst of a growing commercial bank and have recently received
loan applications from
two companies of relatively
similar size.
Show below are selected financial data for these two applicants at the end of the
current year:
RED CO
BLUE CO.
Net credit sales
P700.000.00
P650,000.00
Cost of goods sold
P500,000.00
P490,000.00
Cash
P60,000.00
P20,000.00
Accounts receivable (net)
P77,000.00
P60,000.00
Inventory
P94,000.00
P180,000.00
Current liabilities
P11000.00
P105,000.00
Assume that the year-end balances for accounts receivable and for inventory
approximate the average
balances of these items
throughout the year.
A. Compute the following on BLUE
1. Working capital
2. Current ratio
3. Acid test ratio
You are a Corporate Credit Analyst for your bank. A new corporate customer in the manufacturing sector approached your bank for a large credit facility in the sum of $20 million for production equipment and warehousing. The customer submitted the following financials to you.
Would you grant the credit? Justify stating three reasons to support your decision.
Bank A is an investment bank. It is involved in arranging mergers and
acquisitions and IPOS as well as being a broker in securities.
Bank B specialises in car financing. As new cars require a Certificate of
Entitlement (COE) which is valid for 10 years, Bank B car loans have a loan
period of 10 years or less. The loans have fixed interest rates.
Bank C specialises in housing loans with loan periods of 30 years or less, on a
floating interest rate basis.
Rank the fhree (3) banks' income, in terms of sensitivity to interest rate changes,
from lowest to highest sensitivity. Discuss the reasons for your answer.
Chapter 24 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 24 - Bond terms Use Table 24.1 (but not the text) to...Ch. 24 - Bond terms Look at Table 24.1: a. The AMAT bond...Ch. 24 - Bond terms Select the most appropriate term from...Ch. 24 - Prob. 5PSCh. 24 - Bond terms Bond prices can fall either because of...Ch. 24 - Security and seniority a. As a senior bondholder,...Ch. 24 - Prob. 8PSCh. 24 - Prob. 9PSCh. 24 - Security and seniority a. Residential mortgages...Ch. 24 - Sinking funds For each of the following sinking...
Ch. 24 - Call provisions a. Look at Table 24.1. Suppose...Ch. 24 - Covenants Alpha Corp. is prohibited from issuing...Ch. 24 - Prob. 14PSCh. 24 - Private placements Explain the three principal...Ch. 24 - Convertible bonds True or false? a. Convertible...Ch. 24 - Convertible bonds Maple Aircraft has issued a 4%...Ch. 24 - Convertible bonds The Surplus Value Company had 10...Ch. 24 - Prob. 19PSCh. 24 - Convertible bonds Iota Microsystems 10%...Ch. 24 - Convertible bonds Zenco Inc. is financed by 3...Ch. 24 - Prob. 22PSCh. 24 - Prob. 23PSCh. 24 - Bank loans, commercial paper, and medium-term...Ch. 24 - Prob. 25PSCh. 24 - Tax benefits Dorlcote Milling has outstanding a 1...Ch. 24 - Convertible bonds This question illustrates that...Ch. 24 - Prob. 28PS
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