Write a corporate management report in which you present a valuation model for a proposed new issuance of corporate
bonds with a face value of $70 million dollars. The report should include numerical illustrations within tables and graphics,
along with discussions that guide the manager through the illustrations and graphics. The valuation model should be
hypothetical in nature.
In your report, be sure to addresses the following:
Develop and present a valuation model for corporate debt with a face value of $70 million dollars. The model should use
hypothetical assumptions for the coupon rate and other characteristics as well as a hypothetical market interest rate. You
must also select a maturity for the bonds and the frequency of the coupon payments. The market rate should be
justifiable/reasonable given current market conditions. Explain why the model will be important for the issuance process
that is being considered.
Initiate a discussion for the possible determinants of the market interest rate that you chose. This should be a general
discussion. For example, you should explain how the inflation rate in the economy could be expected to impact the market
rate that you chose.
Explain how the market rate you chose will be dependent upon the maturity. Describe what you believe to be the most
persuasive theory associated with the shape of market interest rates across the maturity spectrum (i.e., the yield curve).
Comment on how the different bond characteristics would influence the valuation of the bond. Provide illustrations in a
summary table format for how the value might adjust for the inclusion of call provisions and sinking funds. Explain the
nature of each of these characteristics.
Explain how the financial health of the corporation as revealed through financial statements and ratios will impact the
bond rating and in turn, the valuation model. Cite and discuss related academic research on bond ratings and financial
analysis. Create a summary table that depicts possible impacts on the bond valuation model from the corporation having
weaker and stronger financial health. Use reasonable assumptions for the revaluation. Clearly explain what is changing
within the model for your assumption of both weak and strong financial health. Also, determine if a minimum wage worker
would be able to afford to buy the bond?
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