4.5 assignment: financing s&s air’s expansion plans with a bond

4.5 Assignment: Financing S&S Air’s Expansion Plans with a Bond Issue

1. Using a Word document, complete the requirements of the Mini-case “Financing S & S Air’s Expansion Plans with a Bond Issue”, located at the very end of Chapter 7 in your course textbook.
2. Your response should take the form of a memo, as explained in the case.
   1. For each of the ten bond features listed, briefly describe the likely impact of each of the features on the coupon rate demanded by potential bond investors when this new bond is issued.  Will it cause the required coupon rate to be higher or lower?
   2. In addition, for each of the ten bond features listed, briefly describe the advantages or disadvantages, from S&S Air’s  perspective, of implementing that feature with the newly-issued bond.

QUESTIONS

The security of the bond—that is, whether the bond has collateral.

The seniority of the bond.

The presence of a sinking fund.

A call provision with specified call dates and call prices.

A deferred call accompanying the preceding call provision.

A make-whole call provision.

Any positive covenants. Also, discuss several possible positive covenants S&S Air might consider.

Any negative covenants. Also, discuss several possible negative covenants S&S Air might consider.

A conversion feature (note that S&S Air is not a publicly traded company).

A floating rate coupon.

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4.3 Discussion: Understanding Bonds and the Debt Markets

Instructions

1. Review the rubric to make sure you understand the criteria for earning your grade.
2. In your textbook, read Chapter 7.
   1. To help you further understand the chapter, download and review the PowerPoint file, Chapter 7 – Interest Rates and Bond Valuation.
3. Review the “Bond Market” videos that are linked within the Resources section of this page.
4. Navigate to the Discussion page and respond to the following prompts:
   1. Funding: What are the key differences between using bonds to finance capital projects and issuing stock for that purpose?
   2. Ethics Consideration:
      1. A major scandal broke in 1996 when allegations were made that Moody’s Investors Service, Inc. was issuing ratings on bonds it had not been hired to rate, in order to pressure issuers to pay for their service.
      2. In a Wall Street Journal story dated May 2, 1996, it was reported that after choosing to use rating services other than Moody’s, officials in Chippewa County, Michigan, received a letter from the executive vice president warning that the “absence of a rating … might imply that we believe that there exist deficiencies” in the financing arrangements.
      3. Further, Moody’s billed the county anyway, “as part of a long-standing policy.”
      4. Moody’s actions resulted in an antitrust inquiry by the U.S. Justice Department and the departure of several of the firm’s senior management.
   3. How do bond investors rely on bond ratings to make their investment decisions?  What is unethical in this situation? 
5. Support your position with at least one biblical principle with a specific Bible verse that you feel is relevant to the situation (explain how and why it applies).
6. Your discussion should be based on the chapter and videos, as well as other resources that can contribute to the discussion.
7. Your initial post should be 150 to 300 words in length and include at least one academic source that is properly cited.  Your initial post is due by the end of the fourth day of the workshop.
8. Respond to two of your classmates’ postings, writing as if you were reviewing their postings in an academic journal.  Your discussion responses should therefore answer the following questions as applicable:
   1. Are your classmates’ arguments articulate and logical?  Are their facts correct?
   2. Are your classmates’ interpretations reasonable and consistent with experts in the field?  Are your classmates consistent with both the substance and intent of their references?
9. Your discussion responses should not focus on whether or not you agree with your classmates, but how well they present their positions.  Each response should be at least 150 words in length and cite at least one academic source.  Please strive to make your discussion responses either extend the scholarly discussion in a productive direction, or offer thoughtful analysis that helps your classmates deepen their own understanding.

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4.2 Discussion: Collaboration

Instructions

1. Review the rubric to make sure you understand the criteria for earning your grade.
2. Navigate to the Discussion page and respond by making at least one post or reply that addresses one of the following:
   1. Ask a question about this workshop’s activities while providing an attempted solution or at least a reference to relevant material in the textbook.
   2. Share insights, new understandings, or “ah ha” moments resulting from your reading and/or work on activities.
   3. Deepen the discussion by raising the application or the implications of a concept presented in the textbook or devotional materials.
   4. In addition, you may meet the posting requirement by posting a proposed solution to a question raised by another student and then dialogue about it in this topic, attempting to reach a solution.
3. Your initial post is due by the end of the fourth day of the workshop.
4. Your postings should:
   1. Clearly state the problem number and problem details, and the questions that you have.
   2. Provide clear questions and proposed answers with evidence of critical thinking by incorporating material from the assigned reading.
   3. Add greater depth to the discussion by introducing new ideas or observations.
   4. Provide clarification to classmates’ questions and provide insight into the discussion.