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1Running Head: MINI-CASE ANALYSIS #2Mini Case Analysis # 2Tuxedo Air Inc. Define the problem“Abondis generally a form of debt which the investors pay to the issuers for a definedtime frame” (What are Bonds? n.d.). Even though Ed is aware of the bond features, he is notcertain about the costs and benefits of the features. Moreover, he is not sure about the effect ofeach feature to the coupon rate of the bond issue (Ross, et al., 2016). For that reason, Suzanne
2MINI-CASE ANALYSIS #2has asked me to prepare a memo to Ed describing the outcome of each of the following bondfeatures on the coupon rate of the bond. Moreover, she has asked me to list any advantages ordisadvantages of each of the following features (Ross, et al., 2016). Mark Taylor and Jack Rodwell, the owners of Tuxedo Air, want to expand theiroperations. Therefore, they instructed their newly hired financial analyst, Ed Cowan, to enlist anunderwriter to help sell $35 million in new 10-year bonds to finance construction (Ross, et al.,2016). Ed has entered into discussions with Suzanne Lenglen, an underwriter from the firm ofRaines and Warren, about which bond features Tuxedo Air should consider and what coupon ratethe issue will likely have (Ross, et al., 2016). As a result, Suzanne and Ed have to decide, whichbond will yield the highest returns that will help the company for the creation of their newexpansion project. Alternative solutions to the problemThe advantages or disadvantages of each feature are:- 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 above call provision.- A Canada plus call provision.