LAGER Ltd, a listed company, has had the following balance sheets from 2016 to 2018 (reported in $million). LAGER is considering to invest $25 million in a new fixed asset, and has asked you, a banker to LAGER, to finance the entirety of this amount by a five years loan. Required: a) Assuming the need to invest $25 million was well founded, would you, from a pure risk perspective, approve the loan? Why and why not? Justify your analysis with the appropriate financial ratios. b) What other factors you would consider in addition to the financial performance in part (a) to grant the loan to LAGER Ltd.? Why?
LAGER Ltd, a listed company, has had the following balance sheets from 2016 to 2018 (reported in $million). LAGER is considering to invest $25 million in a new fixed asset, and has asked you, a banker to LAGER, to finance the entirety of this amount by a five years loan. Required: a) Assuming the need to invest $25 million was well founded, would you, from a pure risk perspective, approve the loan? Why and why not? Justify your analysis with the appropriate financial ratios. b) What other factors you would consider in addition to the financial performance in part (a) to grant the loan to LAGER Ltd.? Why?
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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Question
![LAGER Ltd, a listed company, has had the following balance sheets from 2016 to
2018 (reported in $million).
LAGER is considering to invest $25 million in a new fixed asset, and has asked
you, a banker to LAGER, to finance the entirety of this amount by a five years loan.
Required:
a) Assuming the need to invest $25 million was well founded, would you, from a
pure risk perspective, approve the loan? Why and why not? Justify your
analysis with the appropriate financial ratios.
b) What other factors you would consider in addition to the financial performance
in part (a) to grant the loan to LAGER Ltd.? Why?
LAGER Ltd. Financial Data
2016
2017 2018
2016 2017 2018
Fixed assets
70
98 138
30
30
Paid up
Capital
Retained
30 42
56
earnings
28
39
55
Inventory
Acct
Long Term
3650
70
59 84
133
receivables
debt
Marketable
Account
11
4
7
21
29
41
securities
payable
Short
Cash
1
2
1
68
11
Term debt
Total Assets
146
193 271
Total
Liabilities
146 193 271](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F58c82e4d-6ba6-4e7c-9a1e-9619df6e0801%2Fcb9d6c38-ef74-4707-9232-7940b022c37b%2F6f2sw4_processed.png&w=3840&q=75)
Transcribed Image Text:LAGER Ltd, a listed company, has had the following balance sheets from 2016 to
2018 (reported in $million).
LAGER is considering to invest $25 million in a new fixed asset, and has asked
you, a banker to LAGER, to finance the entirety of this amount by a five years loan.
Required:
a) Assuming the need to invest $25 million was well founded, would you, from a
pure risk perspective, approve the loan? Why and why not? Justify your
analysis with the appropriate financial ratios.
b) What other factors you would consider in addition to the financial performance
in part (a) to grant the loan to LAGER Ltd.? Why?
LAGER Ltd. Financial Data
2016
2017 2018
2016 2017 2018
Fixed assets
70
98 138
30
30
Paid up
Capital
Retained
30 42
56
earnings
28
39
55
Inventory
Acct
Long Term
3650
70
59 84
133
receivables
debt
Marketable
Account
11
4
7
21
29
41
securities
payable
Short
Cash
1
2
1
68
11
Term debt
Total Assets
146
193 271
Total
Liabilities
146 193 271
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