Text Problems Wk5

FIN- 571 Text Problems WK5

Text Problems WK5

Peter Sidiropoulos

FIN - 571

July 1st 2013

Prof. Kenneth Baker

|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 Category |

| |Fixed Charge Coverage |

| |Funds From Operations/Total Debt |

| |Long-Term Debt/Capitalization |

| |...