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Running head: MINI CASE ANALYSIS 2Mini Case Analysis 2William TurnerBUSI 2093 – Introduction to Managerial FinanceProfessor: Audrey LowrieYorkville UniversityFriday, May 17th, 2019
MINI CASE ANALYSIS 2IntroductionThe owners of Tuxedo Air have decided to expand their operations. Mark Taylor and JackRodwell have instructed a newly hired financial analyst, Ed Cowan, to enlist an underwriter to help sell $35 million in new 10-year bonds to finance construction for the project (Ross, et al., 2017, pp.260). Ed has begun discussions with Suzanne Lenglen, from the firm of Raines and Warren, about which bond features Tuxedo Air should consider and what coupon rate the issue will likely have (Ross, et al., 2016, pp.260). The following case study analysis aims to inform the management group of Tuxedo Air about the different types of bonds and coupon rates that would be best suited for their expansion goals. Problem IdentificationThe issue is centered around the lack of knowledge on bond features and coupon rates. Bond issues are suited for their unique purpose and Tuxedo Air needs to which features and ratesare most appropriate for their expansion project. $35 million is a substantial amount of debt to incur and selecting the incorrect features could be catastrophic for the organization. Ed and Suzanne have the responsibility of analyzing the different bond options and selecting those that will yield the highest returns for the company AlternativesAs previously stated, bonds come with an assortment of features that impact the coupon rate. For the bond issuer or bond purchaser, the large number of combinations available makes it difficult to decide on the proper combination of bond details to choose (Fulmer, et al., 1988).
MINI CASE ANALYSIS 2Therefore, Tuxedo Air has several alternatives they can choose from for their upcoming issue. The difficult task is selecting those features that are most advantageous to the issuer.Evaluation of AlternativesBefore discussion bond features in detail, it is important to note the coupon is the annual coupon divided by the face value of a bond and is the rate that’s used to determine the periodic