Corporate Finance Stratergy Assignment Example | Topics and Well Written Essays - 1750 words

Corporate Finance Stratergy - Assignment ExampleASSIGNMENT COVERS SHEET Office usance only INDICATIVE MARK All marks are subject to ratification at the let Examining Board. ... ...... Problem 1 1. Calculate the combine effect of the three off-balance- ragtime items in Exhibit 3 on each of the following three financial ratios shown in Exhibit 2. Following is the habituated information of the ratios in the Exhibit 2. Exhibit 2 - Selected Ratios and Credit Yield Premium Data for Montrose EBITDA / interest expense 4.72 long-run debt / equity 0.30 Current assets / Current liabilities 1.05 Credit yield premium over US Treasuries 55bps Following is the given information of the off balance sheet items in the Exhibit 3. Exhibit 3 Hudson chemic off-balance sheet items 1 Hudson Chemical has guaranteed the long-term debt (principal only) of an unconsolidated affiliate. This obligation has a present value of $995,000. 2 Hudson Chemical has sold $500,000 of accounts receivable with recourse at a yield of 8 percent. 3 Hudson Chemical is a lessee in a new non-cancellable operating leasing agreement to finance transmission equipment. The discounted present value of the affiance payments is $6,144,000 using an interest rate of 10 percent. The annual payment will be $1,000,000. When we calculate the combined effect of the three off balance sheet items on the three ratios the following changes will create place. EBITDA / Interest Expense a. The guarantee of long term debt will not affect operating (EBITDA) or the interest expense. This ratio