Delos Debt Renegotiations (B). Delos is continuing to renegotiate its prior loan agreement (E80 million for six years at 8.625% per annum), two years into the agreement. Delos is now facing serious tax revenue shortfalls, and fears for its ability to service its debt obligations. So it has decided to get more aggressive and has gone back to its lenders with a request for a haircut, a reduction in the remaining loan amount. The banks have, so far, only agreed to restructure the loan agreement for another two years (a new loan of six years on the remaining principal balance) but at an interest rate a full 200 basis points higher, 10.625%. If Delos accepts the current bank proposal of the remaining principal for six years (extending the loan an additional two years since two of the original six years have already passed), but at the new interest rate, what are its annual payments going to be? How much relief does this provide Delos on annual debt-service? Delos's demands for a haircut are based on getting the new annual debt service payments down. If Delos does agree to the new loan terms, what size of haircut should it try to get from its lenders to get its payments down to €10 million per year?

Delos Debt Renegotiations (B). Delos is continuing to renegotiate its prior loan agreement (E80 million for six years at 8.625% per annum), two years into the agreement. Delos is now facing serious tax revenue shortfalls, and fears for its ability to service its debt obligations. So it has decided to get more aggressive and has gone back to its lenders with a request for a haircut, a reduction in the remaining loan amount. The banks have, so far, only agreed to restructure the loan agreement for another two years (a new loan of six years on the remaining principal balance) but at an interest rate a full 200 basis points higher, 10.625%. If Delos accepts the current bank proposal of the remaining principal for six years (extending the loan an additional two years since two of the original six years have already passed), but at the new interest rate, what are its annual payments going to be? How much relief does this provide Delos on annual debt-service? Delos's demands for a haircut are based on getting the new annual debt service payments down. If Delos does agree to the new loan terms, what size of haircut should it try to get from its lenders to get its payments down to €10 million per year?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Bing Ltd a UK based company is due to pay 80 million Lira to Google Ltd. The spot rate is Lira 2,400/£. Interest rates for the next year are expected to be 8% in the UK and 20% in Italy. Required: Assume the International Fisher Effect is valid, evaluate the effect on the sterling cost of this transaction if Bing Ltd delay payments by one year.
Ziebart Corp.'s EBITDA last year was $430,000 ( = EBIT + depreciation + amortization), its interest charges were $9,500, it had to repay $26,000 of long-term debt, and it had to make a payment of $17,400 under a long-term lease. The firm had no amortization charges. What was the EBITDA coverage ratio? Select the correct answer. a. 8.95 b. 7.97 c. 8.46 d. 7.48 e. 9.44
H5. Smith Development Co. contracted a 30-year FRM loan with monthly amortization of $1.5 million at an interest rate of 13% five years ago. John Smith, a partner, just talked to a loan officer and learned that he can refinance the current balance on the loan at interest rate of 12% for a FRM amortized over 25 years. However, he also estimated the total refinancing cost to be $50,000. If Smith Development Co. holds the mortgage debt for 25 more years, would you recommend them to refinance? What if it holds for three years?
Lafayette Group (U.S.). The Lafayette Group, a private equity firm headquartered in Boston, borrows £5,000,000 for one year at 7.375% interest. a. What is the dollar cost of this debt if the pound depreciates from $2.0260 = £1.00 to $1.9460 = £1.00 over the year? b. What is the dollar cost of this debt if the pound appreciates from $2.0260 = £1.00 to $2.1640 = £1.00 over the year? a. What is the dollar cost of this debt if the pound depreciates from $2.0260 = £1.00 to $1.9460 = £1.00 over the year? % (Round to two decimal places.) b. What is the dollar cost of this debt if the pound appreciates from $2.0260 = £1.00 to $2.1640 = £1.00 over the year? % (Round to two decimal places.)
2 A company is leasing equipment for five years for an annual payment of $10,000. With an interest rate of 6%, this provides a present value of $42,124. The total cost of the equipment is $40,000, and there is no residual value. Should the company record this as a finance lease under the present value test? O Yes, because the present value plus cost of equipment exceeds total annual payments. O Yes, because the present value exceeds the total cost of equipment. O No, because the present value plus cost of equipment exceeds total annual payments. O No, because the present value exceeds the total cost of equipment.
Suppose a government has no debt and a balanced budget. Suddenly it decides to spend $4 trillion while raising only $3 trillion worth of taxes. (a) What will be the government's deficit? (b) If the government finances the deficit by issuing bonds, what amount of bonds will it issue? (c) At a 4 percent rate of interest, how much interest will the government pay each year? (d) Add the interest payment to the government's $4 trillion expenditures for the next year, and assume that tax revenues remain at $3 trillion. In the second year, compute: (i) the deficit; (ii) the amount of new debt (bonds) issued to finance the deficit in the second year; (iii) the total debt at the end of the second year; and (iv) the debt service requirement. Express all money figures in billions of dollars.
9
39. Haystack, Inc. manufactures machinery used in the mining industry. On January 2, 2021 the leased equipment with a cost of $480,000 to Silver Point Co. The 5-year lease calls for a 10% down payment and equal annual payments at the end of each year. The equipment has an expected useful life of 5 years. Silver Point's incremental borrowing rate is 10%, and it depreciates similar equipment using the double- declining balance method. The selling price of the equipment is $780,000, and the rate implicit in the lease is 8%, which is known to Silver Point Co. What is the amount of interest expense recorded by Silver Point Co. for the year ended December 31, 2021? PV Annuity Due PV Ordinary Annuity Single Sum 8%, 5 periods 68508 10%, 5 periods 62092 a. $70,200 b. $56,160 c. $62,400 d. $78,000 4.31213 4.16986 -12- 3.99271 3.79079 PV 21
Marin Fashion Company enters into a lease arrangement with Highpoint Leasing for 5 years. Marin agrees to pay 7% of its net sales as a variable lease payment. Marin does not pay any fixed payments. Marin is a highly successful company that has achieved over $1,200,000 in net sales over the last 7 years. Both Marin and Highpoint forecast that net sales will be a much greater amount than $1,200,000 in subsequent years. As a result, it is highly certain that Marin will make payments of at least $84,000 ($1,200,000 × 7%) each year.What is the lease payment amount Marin should use to record its right-of-use asset? Lease payment $enter the lease payment in dollars

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