Fin 571 Week 4

Select from the pull down menu Ch. 1, 2, 3, 4, 5, 6, 7, or 8 and begin the Readiness Assessment Quiz on the left-hand menu once you select a chapter.

Complete the problem sets and show all steps in your work:

• Ch. 17: Problem B1

B1.(Choosing financial targets) Bixton Company’s new chief financial officer is evaluating Bixton’s capital structure. She is concerned that the firm might be underleveraged, even though the firm has larger-than-average research and development and foreign tax credits when compared to other firms in its industry. Her staff prepared the industry comparison shown here.

Bixton’s objective is to achieve a credit standing that falls, in the words of the chief financial officer, “comfortably within the ‘A’ range.” What target range would you recommend for each of the three credit measures?

Before settling on these target ranges, what other factors should Bixton’s chief financial officer consider?

Before deciding whether the target ranges are really appropriate for Bixton in its current financial situation, what key issues specific to Bixton must the chief financial officer resolve?

Rating CategoryFixed Charge CoverageFunds From Operations/Total DebtLong-Term Debt/Capitalization

Aa

4.00–5.25x

60–80%

17–23%

A

3.00–4.30

45–65

22–32

Baa

1.95–3.40

35–55

30–41

an

It would be recommended the firm stay in the low range of the rating fixed charge coverate= 3.40- 4.30

Funds from operation/total debt= 55-65

Long term debt/ total capitalization =25- 30

Issuance cost is when you can completely use full non interest tax credit and debt management considerations. The company CFo should examine the company R&D as intangible asset making the leader reconsider loan same percentage of debt to bixton as its competitors.

The CFO needs to consider R&D and foreign tax credit. The additional tax shield from additional debt may not be valuable when R&D and foreign tax credits into thoughtfulness.

• Ch. 18: Problems...