Acc/543 Wk 4- Debt Financing

This company, a retail clothing store with three suburban locations in Atlanta, Georgia, is incorporated, with each of the three Boudoir sisters owning one-third of the outstanding stock. The company is profitable, but rapid growth has put it under severe financial strain. The real estate is all under mortgage to an insurance company, the inventory is being used under a blanket chattel mortgage to secure a bank line of credit, and the accounts receivable are all being factored. With total assets of $7 million, the company now needs an additional $450,000 to finance a building and fixtures for a new outlet.

• Reason - Tellers must have examined the check carefully, considered legal and Credit Union requirements,

9. What is the Cost of Debt, before and after taxes? Using the interest rate for the largest debt…cannot use the weighted interest rate for the debt since it includes capital lease obligations with no stated rate and could not find in the notes to the financials. 5.4% After tax cost is .054 x (1-.36) = 3.5%

Certificate of Deposit is a savings note issued by a bank to a depositor who places funds in saving for a set period.

The conveyance of a noncash financial asset to someone other than the issuer of that financial asset. The following include transfers: selling a receivable, putting a receivable into securitization trust, and receivable as collateral.

However, individual business loan may not even be enough, therefore, finding partnership with stockholders, or go into business with another person willing to help financially. A large bank loan of $200,000 would be needed and preferably prefer a business partner that would go into business, and preferably a family member. They would also need a second business loan of $200,000.

Name given to certificates: Labels on documents conclude that the advances say they are debt, but labels alone cannot change equity to debt. This factor favors the advances treated as debt, but there is less weight to this factor because it is based on form rather than substance.

Royal Insurance Company, Ltd, the issue of holder in due course arises. Federal Credit Union had a check deposited into their bank by a member for the amount of $12,000. This check at the time was of deposit was in dispute but not known to the depositor nor the Credit Union. Royal Insurance Company issued a stop payment on the check the same date that it was deposited. Immediately upon receiving the check the credit union deposited it and forwarded it to Morgan Guaranty for payment. Morgan Guaranty is the bank used by Royal Insurance and the check was payable through them. The definition of Holder in Due Course is “a holder who takes an instrument for value, in good faith, and without notice that it is defective or overdue” (Cheeseman, 2013). The payee or bearer in this case deposited the check or negotiable instrument into the credit union. The credit union would fall under the holder in due course according to doctrine. There was at that time no evidence of forgery, alterations, or irregularity upon presentation of the check to the credit union. In this case the Credit Union wins. According to the HDC doctrine and the requirements for holder in due course the bank is owed the money that was deposited by the maker or drawer of the check. The UCC requirement for taking without notice of defect requirement stipulates that “ a person cannot qualify as an HDC if he or she has notice that the instrument is defective in certain

A document guaranteeing the payment of a specific amount of money is called a negotiable instrument. The negotiable instrument guarantees the specific amount of money to be paid on demand or a set time, with the payee normally named on the document. This instrument is governed by state statutory law. Each state has implemented with some modifications Article 3 of the Uniform Commercial Code (UCC). The UCC defined the validity of a negotiable instrument.

As Mr. Laporte approaches retirement, American Home Products (AHP) has an important decision to make with respect to adopting a more aggressive capital structure policy. Use of debt carries with it advantages and disadvantages. In accordance with value-based management, we recommend that AHP adopts a capital structure consisting of 70% debt. The following points justify such action:

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In November 2003, Maria Ober, a vice president of Deutsche Bank Securities, received a client request for financing the acquisition of a large hospital-supply distributor. The client needed to present the seller with an offering price and an indication of financial commitment within two weeks. The contemplated transaction entailed a highly-leveraged acquisition of the target. The tasks for the student are to value the target firm and projected synergies, assess the credit worthiness of the target (i.e., its ability to bear the high debt), and critically evaluate the general design of the transaction.

Collateralised Debt Obligations, short for CDOs, is an important part of asset securitisation. CDOs provided more liquidity in the economy which was a popular financial innovation. It is an innovative financial product that repackages different debts into a new portfolio. In CDOs, investment bank gathered a series of assets from the fixed-income market, such as mortgage-backed securities, credit-default swaps, and high-yield bonds. Once the CDO has created by the investment bank, it would distribute the cash flows from those mentioned assets to investors in the CDO. CDOs pool all the cash flows from its collection of assets together and divided into rated tranches or slices, in order to satisfy the needs of different risk preferences of investors. Suppose there are three basic tranches, safe, good enough and risky. When money comes in, the top one will be filled in first. It

Negotiable instruments are written orders or unconditional promises to pay a fixed sum of money on demand or at a certain time. Promissory notes, bills of exchange, checks, drafts, and certificates of deposit are all examples of negotiable instruments. Negotiable instruments may be transferred from one person to another, who is known as a holder in due course. Upon transfer, also called negotiation of the instrument, the holder in due course obtains full legal title to the instrument. Negotiable instruments may be

6.Certain some of money:- Sum payable must be certain or capable of being made certain. The sum shall be deemed to be certain when the rate of interest is specified. Money may be payable in installments is also a valid promissory note.