AirJet Best Part, Inc. DeVry University BUSN-379 TABLE OF CONTENTS Assessing Loan Options Calculating EAR 3 Bank Recommendation 3 Regions Best Loan Option 4 Evaluating Competitor’s Stock Boeing 5 Current Stock & Dividend 5 Growth Rate 5 Current Share Price of AirJet Best Parts 5 Preferred Stock or Current Stock 5 Increased Dividends Scenario 5 Bond Evaluation New Coupon
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learned to a real-life simulation experience. Throughout the Course Project, you will assume that you work as a financial analyst for AirJet Best Parts, Inc. The Course Project is provided in two parts as follows: Part I – In Part I, you work with AirJet Best Parts, Inc. staff to identify the best loan options, as well as to valuate stocks and bonds. Part II – In Part II, you will provide the company with a recommendation for purchasing a new machine. You will base your recommendation on the Net
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Course Project-Part 1 Hannah Satterthwaite Professor Gatto DeVry University Finding the Best Loan Options 1. Assuming that AirJet Parts, Inc. is considering loans from National First and Regions Best, what are the EARs for these two banks? National First- (1+.0675/2)²-1 = .078890625 Regions Best- (1+.1317/12)¹²-1= .1399478787 Using the Estimated Annual Rate formula, I found that National First estimated annual rate was 7.9% and Regions Best was 13.995% 2. Based on your calculations
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Course Project – Part I AirJet Best Parts, Inc Student: Goldie Scarbrough Course: Finance Instructor: Professor Mike Woodard Date: 03/23/2013 Task 1: Assessing loan options for AirNet Best Parts, Inc The Company needs to finance $8,000,000 for a new factory in Mexico. The funds will be obtained through a commercial loan and by issuing corporate bonds. Here is some of the information regarding the APRs offered by two well-known commercial banks. Bank | APR | Number of Times
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Course Project Part II Introduction You will assume that you still work as a financial analyst for AirJet Best Parts, Inc. The company is considering a capital investment in a new machine and you are in charge of making a recommendation on the purchase based on (1) a given rate of return of 15% (Task 4) and (2) the firm’s cost of capital (Task 5). Task 4. Capital Budgeting for a New Machine A few months have now passed and AirJet Best Parts, Inc. is considering the purchase on a new machine
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Course Project Part 1 Task 1: Assessing loan options for AirJet Best Parts, Inc. (1) EAR of National First Bank loan is 10.25%. APR = 3.25 (Prime Rate) + 6.75 M = 2 (Compounded semiannually) Formula: EAR = (1+APR/M)^M – 1 Solution: 0.1025 = (1+.10/2)^2 – 1 EAR of the Regions Best Bank loan is 13.99%. APR = 13.17 M = 12 (Compounded monthly) Formula: EAR = (1+APR/M)^M – 1 Solution: 0.1399 = (1+.1317/12)^12 – 1 (2) I recommend using National First Bank because the
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Air Jet Best Parts, Inc. Financial Analysis Task 1: Financing $8,000,000.00 for new factory in Mexico 1. Assuming that AirJet Parts, Inc. is considering loans from National First and Regions Best, what are the EARs for these two banks? Hint for National Bank: Go to the St. Louis Federal Reserve Board’s website (http://research.stlouisfed.org/fred2/). Select “Interest Rates” and then “Prime Bank Loan Rate”. Use the latest MPRIME. Show your calculations. a. National First Bank: 3.25%(prime
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Provide examples of at least one of the following as it relates to the project: a. Sunk Cost - costs that are non-recoverable and shouldn't be used when considering an investment decision. An example of this would be AirJet has already purchased delivery trucks to deliver parts to vendors/customers. This cost would not be taken into consideration because it has no affect on the purchase of a new machine. This was a purchase that was done prior to any decisions made about buying the new machine
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Task 1 1 EARS # of times compounded National First 0.1025 10.25% Semiannually Regions Best 0.139947879 13.99% Monthly 2 The bank that would recommend is National First Bank because the rate is lower and the interest is componded semiannually. 3 Loan amount of $6,950,000 being offered by Regions Best at 8.6%APR for 5 yrs? Monthly payment amount will be $142,926.09 PMT ? PV $6,950,000 Interest 0.72% (8.6% divided by 12 months)
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Project – Part I Task 1: Assessing loan options for Air Jet Best Parts, Inc. The company needs to finance $8,000,000 for a new factory in Mexico. The funds will be obtained through a commercial loan and by issuing corporate bonds. Here is some of the information regarding the APRs offered by two well-known commercial banks. Bank APR Number of Times Compounded National First Prime Rate + 6.75% Semiannually Regions Best 13.17 Monthly 1. Assuming that Air Jet Parts, Inc. is considering
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