22 Jun About AirJet Best Parts, Inc.AirJet B
About AirJet Best Parts, Inc.AirJet BestParts, Inc. is a company dedicated to the design and manufacturing of aviationand airplane technologies and parts. The company has commercial and militaryclients worldwide. Task 1:Assessing loan options for AirJet Best Parts,Inc.The companyneeds to finance $8,000,000 for a new factory in Mexico. The funds will beobtained through a commercial loan and by issuing corporate bonds. Here is someof the information regarding the APRs offered by two well-known commercialbanks. Bank APR Number of Times Compounded National First Prime Rate 3% + 6.75%= 9.75% Semiannually Regions Best 13.17 Monthly 1.Assumingthat AirJet Parts, Inc. is considering loans from National First and RegionsBest, what are the EARs for these two banks? (15 pts) 2.Basedon your calculations above, which of the two banks would you recommend and why?Explain your rationale. (15 pts) 3.AirJetBest Parts, Inc. has decided to take a $6,950,000 loan being offered by RegionsBest at 8.6% APR for 5 years. What is the monthly payment amount on this loan?Do you agree with this decision? Explain your rationale. (20 pts)Task 2: Evaluating Competitor’s StockAirJet BestParts, Inc. is concerned regarding recent changes in its stock prices for thecompany and would like to determine the stock prices for key competitors. Keycompetitors include Raytheon, Boeing, Lockheed Martin, and the Northrop GrummanCorporation.1.Usingthe dividend growth model and assuming a dividend growth rate of 5%, what isthe rate of return for one of three key competitors? Use Yahoo Finance toobtain the latest dividend amount and price for one selected company. (15 pts) 2.Usingthe rate of return above, what should be the current share price of AirJet BestParts, Inc. if the company maintains a constant 1% growth rate in dividends andthe most recent dividend per share paid on the stock was $1.50? Show yourcalculations. (10 pts) 3.AssumeAirJet Best Parts has also a preferred stock issue. The most recent dividendper share paid on the stock was also $1.50, the same as the common stock. Whichone would you think has a higher price, the preferred stock or the currentstock? Explain your rationale. (5 pts)4.Whatwould happen with the price you computed above if AirJet Best Parts, Inc.announces that dividends at the end of the year will increase? What if therequired rate of return increases? What changes in dividends will affect thestock price and how? (10 pts)Task 3: Bond EvaluationAirJet BestParts, Inc. would like to issue 20-year bonds to obtain remaining funds for thenew Mexico plant. The company currently has 7.5% semiannual coupon bonds in themarket that sell for $1,062 and mature in 20 years.1.Whatcoupon rate should AirJet Best Parts set on its new bonds to sell them at parvalue? (10 pts) 2.Whatis the difference between the coupo
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