ratings - A-1.25% 1 1.5 A-4.25 5.5 A 1.00% 1.5 2 A 5.5 6.5...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Sheet1 Page 1 Inputs for synthetic rating estimation Enter the type of firm = 1 (Enter 1 if large manufacturing firm, 2 if smaller or riskier firm, 3 if financia Enter current Earnings before interest and taxes (EBIT) = 10000 (Add back only long term inte Enter current interest expenses = 2000 (Use only long term interest ex Enter current long term government bond rate = 6.00% Output Interest coverage ratio = 5.00 Estimated Bond Rating = A Estimated Default Spread = 1.00% Estimated Cost of Debt = 7.00% For large manufacturing firms For financial service firms If interest coverage ratio is If long term interest coverage ratio is > ² to Rating is Spread is greater than ² to Rating is -100000 0.2 D 10.00% -100000 0.05 D 0.2 0.65 C 7.50% 0.05 0.1 C 0.65 0.8 CC 6.00% 0.1 0.2 CC 0.8 1.25 CCC 5.00% 0.2 0.3 CCC 1.25 1.5 B- 4.25% 0.3 0.4 B- 1.5 1.75 B 3.25% 0.4 0.5 B 1.75 2 B+ 2.50% 0.5 0.6 B+ 2 2.5 BB 2.00% 0.6 0.8 BB 2.5 3 BBB 1.50% 0.8 1 BBB 3 4.25
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: A-1.25% 1 1.5 A-4.25 5.5 A 1.00% 1.5 2 A 5.5 6.5 A+ 0.80% 2 2.5 A+ 6.5 8.5 AA 0.50% 2.5 3 AA 8.50 100000 AAA 0.20% 3 100000 AAA For smaller and riskier firms If interest coverage ratio is greater than to Rating is Spread is-100000 0.5 D 10.00% 0.5 0.8 C 7.50% 0.8 1.25 CC 6.00% 1.25 1.5 CCC 5.00% 1.5 2 B-4.25% 2 2.5 B 3.25% 2.5 3 B+ 2.50% 3 3.5 BB 2.00% 3.5 4.5 BBB 1.50% 4.5 6 A-1.25% 6 7.5 A 1.00% 7.5 9.5 A+ 0.80% 9.5 12.5 AA 0.50% 12.5 100000 AAA 0.20% Sheet1 Page 2 al service firm) erest expense for financial firms) xpense for financial firms) Spread is rating Income Decline 10.00%-50.00% 7.50%-40.00% 6.00%-40.00% 5.00%-40.00% 4.25%-25.00% 3.25%-20.00% 2.50%-20.00% 2.00%-20.00% 1.50%-20.00% 1.25%-17.50% 1.00%-15.00% 0.80%-10.00% 0.50%-5.00% 0.20% 0.00%...
View Full Document

Page1 / 2

ratings - A-1.25% 1 1.5 A-4.25 5.5 A 1.00% 1.5 2 A 5.5 6.5...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online