David Wright, CFA, an analyst with Blue River Investment, is considering buying

Question

David Wright, CFA, an analyst with Blue River Investment, is considering buying a Montrose CXable Company corporate bond. He has collected the following balance sheet and income statement information for Montrose as shown in Exhibit 10.10. He has also calculated the the three ratios shown in 10.11, which indicate that the bond is currently rated "A" accrding to the firm's internal bond-ratingcriteria shown in Exhibit 10.13.

Wright has dedcided to consider some off-balance sheet items in his credit analysis, as the off-balance- sheet items on eachof the ratios found in exhibit 10.11.

   1.EBITDA/Interest expense

   ii. Long-term debt/equity

iii. Current assets/current liabilities.

b. State and justify whether or not the current credit yeild premium compensates Wright for the credit

risk of the bond based on the internal bond-ating criteria found in Exhibit 10.13

Explanation / Answer

Please upload exhibits 10.10 to 10.13.

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