Airjet Best Parts Inc Part 1 - 990 Words

Kim Witten Course Project Part I Task 1 1. National First (Prime rate is 3.25%) +6.75% = 10% Semiannually EAR = (1+.10/2) ^2 – 1 which is 10.25 Regions Best Rate is 13.17% Monthly EAR = (1+.1317/12) ^12 – 1 which is 13.99 2. I think that between National First and Regions Best that National first offers the lower rate after computing the EAR. National first is also only compounded semiannually making it lower then Regions Best. The only thing I worry about it the prime rate changing because if it rises a lot then it could possibly become a higher interest rate them Regions best. At the time being if Air jets Best Inc. takes the National First option then that is 3.74 percent less they would be paying if they had gone with†¦show more content†¦Credit risk of bonds has a possibility that the bond issuer will default on the bond. The risk that the bond issuer will default on the bond will mean that the investor’s actual yield will be lower. Other factors that can contribute to the riskiness of bonds are inflation rates and the financial health of the bond issuer. 4. Some positive covenants AirJet could use in future bond issues is maintain a minimum level of net working capital, maintain any and all collateral or security related to the bond indenture as well as all facilities in good working condition. They also must file quarterly audited financial statements and make sure bondholders have access to this information. They must maintain a certain level of debt coverage ratio as well as allow for redemption in the event of a merger or sale. Some negative covenants that AirJet can have in their future bond issues could be debt limitation, limitation on liens or mergers, consolidations or sales, dividend limitation, or limitations on asset disposal. They cannot pay unusually high dividends and must limit those dividends to a certain amount, they cannot lease or sell off major assets without the approval of the lender, they cannot issue additional debt and they cannot pledge any assets toShow MoreRelatedAirjet Best Parts, Inc. Part 11125 Words   |  5 Pages| | | Course Project - Part 1 - Task 1: Assessing loan options for AirJet Best Parts, Inc. | | | | | | | | | | | | | | | | Question 1: | APR (given) | EAR (calc) | | 2nd ICONV | | | | | | National First | 3.25 + 6.75 = 10% | 10.25 | | NOM = 10% | | | | | | | | | | C/Y = 2 (semiannual) | | | | | | | | | | EFF = 10.2500 | | | | | | | | | | | | | | | | | | | | | | | | | | Regions Best | 13.17 | 13.99 | | 2nd ICONVRead MoreBusn 379 Course Project1155 Words   |  5 PagesProject – Part 1 Task 1: Assessing loan options for AirJet Best Parts, Inc. 1. Assuming that AirJet Parts, Inc. is considering loans from National First and Regions Best, what are the EARs for these two banks? Hint for National Bank: Go to the St. Louis Federal Reserve Board’s website (http://research.stlouisfed.org/fred2/). Select â€Å"Interest Rates† and then â€Å"Prime Bank Loan Rate†. Use the latest MPRIME. Show your calculations. Answer: National First Bank (Prime Rate 7,75% ) EAR = [(1+ ((7.75%)/2))^2Read MoreCourse Project 11131 Words   |  5 PagesCourse Project-Part 1 Hannah Satterthwaite Professor Gatto DeVry University Finding the Best Loan Options 1. Assuming that AirJet Parts, Inc. is considering loans from National First and Regions Best, what are the EARs for these two banks? National First- (1+.0675/2) ²-1 = .078890625 Regions Best- (1+.1317/12) ¹Ã‚ ²-1= .1399478787 Using the Estimated Annual Rate formula, I found that National First estimated annual rate was 7.9% and Regions Best was 13.995% 2. Based on your calculationsRead MoreCompare and Contrast1513 Words   |  7 PagesCourse Project – Part I AirJet Best Parts, Inc Student: Goldie Scarbrough Course: Finance Instructor: Professor  Mike  Woodard Date: 03/23/2013 Task 1: Assessing loan options for AirNet Best Parts, Inc The Company needs to finance $8,000,000 for a new factory in Mexico. The funds will be obtained through a commercial loan and by issuing corporate bonds. Here is some of the information regarding the APRs offered by two well-known commercial banks. Bank | APR | Number of TimesRead MoreFinance Week 61558 Words   |  7 PagesCourse Project Part II Introduction You will assume that you still work as a financial analyst for AirJet Best Parts, Inc. The company is considering a capital investment in a new machine and you are in charge of making a recommendation on the purchase based on (1) a given rate of return of 15% (Task 4) and (2) the firm’s cost of capital (Task 5). Task 4. Capital Budgeting for a New Machine A few months have now passed and AirJet Best Parts, Inc. is considering the purchase on a new machineRead MoreFinance Course Project1960 Words   |  8 PagesCourse Project Part II Introduction You will assume that you still work as a financial analyst for AirJet Best Parts, Inc. The company is considering a capital investment in a new machine and you are in charge of making a recommendation on the purchase based on (1) a given rate of return of 15% (Task 4) and (2) the firm’s cost of capital (Task 5). Task 4. Capital Budgeting for a New Machine A few months have now passed and AirJet Best Parts, Inc. is considering the purchase on a new machineRead MoreBusn379 Week 6 Course Project Part 2 Essay1346 Words   |  6 PagesTask 4. Capital Budgeting for a New Machine A few months have now passed and AirJet Best Parts, Inc. is considering the purchase on a new machine that will increase the production of a special component significantly. The anticipated cash flows for the project are as follows: Year 1 $1,100,000 Year 2 $1,450,000 Year 3 $1,300,000 Year 4 $950,000 You have now been tasked with providing a recommendation for the project based on the results of a Net Present Value Analysis. Assuming thatRead MoreBusn Essay1786 Words   |  8 PagesCourse Project Part II Introduction You will assume that you still work as a financial analyst for AirJet Best Parts, Inc. The company is considering a capital investment in a new machine and you are in charge of making a recommendation on the purchase based on (1) a given rate of return of 15% (Task 4) and (2) the firm’s cost of capital (Task 5). Task 4. Capital Budgeting for a New Machine A few months have now passed and AirJet Best Parts, Inc. is considering the purchase on a new machine