Finance and Debt

Corporations have their pros and cons. The pros of a corporation include the liability of the corporation instead of individuals, corporate taxes rather than personal taxes, the everlasting nature of a corporation, and the capital corporations make on the stock market. The cons of a corporation include the costs of incorporating, dealing with shareholders, and double taxation.

Intermountain has also benefitted from an AA+ bond rating which reduces their borrowing costs. It is critical that the organisation maintains a healthy financial performance so as to retain the rating. A lower rating would add to their financial pressure.

Question 5: Evaluate the Put-Warrant/Convertible Bond proposal. Does it solve Intel’s capital structure dilemma? What arguments might be made in favor of it?

Even though these products are issued as long-term securities, they have many of the same features as traditional short-term ones. These debt products are both callable and puttable which gives the issuer as well as the investor flexibility. The call feature allows the issuer to buy back the bond. For issuers who are not sure how long they will need funds, they can get out of the agreement by calling the bond. Same goes for the investor; they can exercise the put option and receive their money back. In order to make these products more liquid, investment banks are used as remarketing agents. These agents resell the bonds at new rates to other investors. However, there is a cap on how high the rates on the bonds can be reissued at in order to limit the coupon payments. These variable rate debts also track the JJ Kenny index. The JJ Kenny index is an index similar to the S&P 500 but for municipal bonds. Also, a synthetic fixed rate debt can be created from combining a variable rate debt and a SWAP. Given the two proposals, the state is faced with three forms of debt. The first form is a fixed rate option that would provide the state with 20 year serial issued bonds with fixed

These bonds are short-term, only 12 months until maturity and pay 12% annually. I haven’t seen all the details on them, but this really might be a good way to increase you’re your total income and at the same time avoid the interest rate risk of intermediate-term and long-term bonds.”

This will be a perfect project to accept due to life span stay between 2 to 3 years. This will be within company’s policy.

Instead of Industrial Revenue bonds, Harris Seafoods can use conventional bonds; which they are going to reduce de NPV.

The question that transcends the project is whether equity investors be sufficiently rewarded to justify there financing interests. The answer to this question is dependent

The advantage of debt financing is that interests paid on such debt are tax deductible. If a company has the intention of maintaining a permanent debt, the present value of the tax shield can be obtained by discounting them by the expected rate of return demanded by the investors who hold the debt (this is a perpetuity, where in reality would be the maximum possible present value for the tax shield). This tax shield value reduces the tax bill and increases the cash payment to investors, increasing the value of their investments.

Most Mexican investors base their assumptions of a capital requirement to participate on the sector on the USD$1B mark thanks to the Round 1.1. When in fact investors can partner with FEP to acquire low risk (brownfield) E&P projects valued in excess of NPV USD$300mm for as low as USD$ 1mm.

Many government related institutions issue bonds, some supported by the revenues of a specific institution and some guaranteed by a government sponsor. For example, in Canada they have a bank that issue bonds that are guaranteed by the

Project finance transactions are typically either (i) limited recourse, where lenders do not assume the entire financial risk of the project and instead rely on mechanisms such as completion guarantees or parent guarantees, or (ii) non-recourse, where the revenues generated from the project and the project’s assets repay the indebtedness owed to the lenders. In addition to providing funds to complete new projects, the scope of project finance also allows project companies to expand existing projects or refinance existing indebtedness on existing projects at more favorable terms.

How sensitive is the value of the project to the threat of currency controls and expropriation? How can the financing be structured to make the project less sensitive to these political risks?

Gas and oil development plans are branded by huge capital investments. Exploration and production operations incorporate numerous activities, reaching from undertaking geological surveys, finding hydrocarbon resources, and commercially exploiting them. Projects in this area are of a high risk nature in physical trading, and political sense as it is hard to know in advance the presence, degree and value of hydrocarbon resources, as well as production costs and the price oil of oil in the global world market Kaiser, Mark .J (2007)

The objective of using project financing to raise funds is to build a structure that has interest to investor, and to reduce the stakeholders’ risk by diverting some of the risks to parties that can manage them better. Payment of principal, interest, dividends and operating costs is derived from the project’s incomes and assets. The shareholders, in both debt and equity, require certain basic legal, regulatory