Saudi electronic university Financial Management Flexibility Worksheet

1)You are assessing the payback alternatives and borrowing costs for the bonds of a company where an equivalent government bond yields 4.5%, the swap spread is 15bp, the pure credit spread is 25bp and the risk premium is 40bp. Based on this information, answer the following three questions.Which of the following is least likely to be considered as a potential payback method when assessing payback alternatives under the structured approach to credit analysis?A) Leasing B) Refinancing C) Cash flow profits over time D) Sale of assetsYou are assessing the payback alternatives and borrowing costs for the bonds of a company where an equivalent government bond yields 4.5%, the swap spread is 15bp, the pure credit spread is 25bp and the risk premium is 40bp. Based on this information, answer the following three questions.What is the most common payback method adopted by companies? A) External support B) Refinancing C) Sale of assets D) Cash flow profits over timeYou are assessing the payback alternatives and borrowing costs for the bonds of a company where an equivalent government bond yields 4.5%, the swap spread is 15bp, the pure credit spread is 25bp and the risk premium is 40bp. Based on this information, answer the following three questions.What is the all in cost of the company’s debt?A) The all in cost will be 4.90%B) The all in cost will be 5.05%C) The all in cost will be 5.15%D) The all in cost will be 5.30%