Issuing Debt and Bond Valuation Essay

1. Internally generated funds and stock issuances ar available for for-profit and internally generated funds, philanthropy, government grants, and sale of real estate are available to non-for-profit health care providers to increase their equity position.2. The advantages of a assesspaying entity in issuing debutantet are fixed debt service payments, fixed interest rate, no hazard ha investor sells tie up back, and no leer of credit needed, while disadvantages are higher issuance expenses, whitethorn result in higher interest cost over life of loan, no refunds for obliges, unstable deb service payments, and decline in cash flow if interest rates increase.3. Debenture is an unsecured link, which is not backed by specific assets of the organization so, it carries higher risk with a high interest rate. On the other hand, subordinated debenture is an unsecured bond that is junior to debenture bonds.In a case of default, the bondholders are paid first.4. An investment banker synd icate a bond issue with other investment bankers to work as an underwriter for private placements to sell to a comparisonticular institution or group of institutions (banks, pension funds, or insurance companies).5. $1,000 zero coupon bond with a 20-year maturity has a market price of $311.80. range of return = (railyard / 311.80)(1/20) = 1.7 guanine / 311.80 tells you how many times the money multiplies over 20 years.6. A tax-exempt bond was recently issued at an annual 8 percent coupon rate and matures 20 years from today. The par value of the bond is $1,000.7. If mandatory market rates are 8 percent, the market price of the bond = $80 x PVFA (0.08,20) + $1000 x PVF (0.08, 20) = $80 x 9.8181 + $1000 x 0.2145 = $1000 8. If required market rates retrovert to 5 percent, the market price of the bond = $80 x (0.08,20) + $1000 x (0.05,20) = $750 9. Charles City Hospital plans on issuing a tax-exempt bond at the bond are $1,000. 10. If required market rates are 6 percent, the value o f the bond= 60 x PVFA (0.06,1)+1000 x PVF (0.06,1)= 60 x 0.943 + 1000 x 0.943=$996.4 11. If required market rates fall to 12 percent, the value of the bond=120 x PVFA (0.12,1) + 1000 x PVF (0.12,1) = 120 x 0.892 + 1000 x 0.892 = $ 996.8 12. Since 3 percent, 6 percent, and 12 percent values are lower than $1000. They are change at a discount. 13. weft1 Device cost 400,000Useful value 5 periodical Depreciation 80,000,00Interest rate 15%Loan period 5Loan yearly installments 119,326.22Option2Lease Yearly Payment $80,000.00Difference between loan & Lease $39,326.22Tax deliver=Yearly Depreciation X 40% =$32,000.00=$400,000/5 years X Tax %After tax cost of debt $3,539.00 interest component X after tax rate 9%Total saving from option1 $35,539.00Option 1 (Borrowing) $83,787.22Option2 (Leasing) $80,000.00Therefore, Mercy medical mega center should claim the surgical device because the total cost will be less than to borrow the money to barter for the device.