The Board of Broward General Hospital made a decision to raise $50M by issuing bonds for the construction of a new critical care tower.
finance
Description
2. The Board of Broward General Hospital made a
decision to raise $50M by issuing bonds for the construction of a new critical
care tower. Some of the middle management staff are concern, they do not
understand how the bond market works. As a Senior Business Analyst, you are
asked to present a fifteen minutes Power Points presentation to the group at
the next Department Leader’s meeting about the fundamentals of US bond market.
Explain how each of the following affects a bond financial value (20points)
2a-RRF (Real
Risk-Free Rate)
2b-IP
(Inflation Premium)
2c-DRP (Default
Risk Premium)
2d-LP
(Liquidity Premium)
2e-PRP
(Price Risk Premium)
2f-CRP
(Call Risk Premium)
2g-The
relationship between interest rate and Bond price
2h-Par
Value of a Bond
2e-What
happen to a bond price when the bond is sold at a discount or at a premium?
2j-How
and in what way the ranking of the hospital credit could affect its access to
capital.
2k-Maturity
date
2l-Coupon
rate
2m-New
issues versus outstanding bonds
7. The hospital
Executive would like to invest $4M to procure the latest piece of equipment in
medical technology. Leadership believes this equipment will revolutionize and
enhance patient care. The analyst you replaced have used straight line
depreciation method. You believe the hospital should depreciate the asset
faster. Explain your rationale. The CEO believes straight-line depreciation
method is a good way to increase depreciation expenses and reduce tax liability
in the first three years. You disagree and decide to use MACRS – Depreciation
method to prove your point. Compute total depreciation for the first 3 year
under SL & MACRS. (20points)
