1/ what is the sustainable level of debt? 2/ What course of action do you recomm
ID: 2454427 • Letter: 1
Question
1/ what is the sustainable level of debt?
2/ What course of action do you recommend?
(Please explain as more as you can = high rating) Thank you!
Six Flags Income Statement 2007 2006 2005 2004 2003 Revenue 972,780 945,665 956,757 879,586 883,089 Operating Expenses 757,617 736,248 666,832 613,648 592,555 Depreciation & Amortization 138,787 132,295 127,658 125,374 119,715 Loss on Fixed Assets 43,062 27,057 13,906 11,676 -301 Income from Operations 33,314 50,065 148,361 128,888 171,120 Other Expenses Interest Expense 199,022 199,991 183,547 191,563 213,565 Minority Interest in Earnings 39,684 40,223 39,794 37,686 35,997 Other Expenses 12,367 948 19,303 37,731 27,592 Net loss on debt extinguishment 20,122 11,560 10,877 14,356 626 Taxable Income -237,881 -202,657 -105,160 -152,448 -106,660 Income Tax Expense 6,203 4,318 3,705 24,442 -34,660 Net Income before discontinued operations -244,084 -206,975 -108,865 -176,890 -72,000 Discontinued Operations -9,075 -97,605 -2,073 -287,919 10,287 Cumulative Effect of a change in accounting principle -1,038 Net Income -253,159 -304,580 -111,976 -464,809 -61,713Explanation / Answer
Sustainable deby the level of debt which allows a debtor country to meet its current and future debt service obligations in full, without recourse to further debt relief orrescheduling, avoiding accumulation of arrears, while allowing an acceptable level of economic growth.
Indicators of sustainable debt:
(a) Debt service to GDP ratio,
(b) Foreign debt service to exports ratio,
(c) Government debt service to current fiscal revenue ratio
Long run debt to GDP ratio*= (primary deficit*)/(nominal growth rate of GDP*-nominal interest rate on government debt*)
Where a * denotes the expected long-run equilibrium value and the primary deficit is the government’s budget deficit excluding interest payments.
Total Intrest and Preferance Dividend= 1154840
Payment of Long term Debt= $2257788
Total $3412628
2007 2006 2005 2004 2003 Total Interest Expense 199,022 199,991 183,547 191,563 213,565 987,688Related Questions
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