# Compare and Contrast

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Course 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 Times Compounded | National First | Prime Rate + 6.75% | Semiannually | Regions Best | 13.17 | Monthly | 1. Assuming that AirJet Parts, Inc. is considering loans from National First and Regions Best, what are the EARs for these two banks?…show more content…
Preferred dividends are generally fixed they can be valued as a constant growth rate of zero. You use the zero growth models for the preferred stock and the assumption that the dividends always stay the same and you use the constant growth model for common stock because the dividend grows by a specific percent a year. 4. What would happen with the price you computed above if AirJet Best Parts, Inc. announces that dividends at the end of the year will increase. What if the required rate of return increases? What changes in dividends will affect the stock price and how? If the amount of the dividend were to increase at the end of the year, the common stock amount would increase. If the required would rate of return increase, the current share price of common stock would decrease. As the stock price increases, the risk becomes higher for investors but they would be willing to pay for the higher price because there is also an expectation that there will be a higher return in dividends. An increase in dividends would make stock higher as investors will see that the stock pays good dividends and they will be willing to pay good money in return for a good payout. Task 3: Bond Evaluation AirJet Best Parts, Inc. would like to issue 20-year bonds to obtain remaining funds for the New Mexico plant. The company currently has 7.5% semiannual