For Questions 1 - 10, assume the position of an intern at the corporate finance

Question

For Questions 1 - 10, assume the position of an intern at the corporate finance division of Ford Motor Company and advice the company on a series of debt-raising alternatives it is considering. Ford is actually planning to issue $150 million worth of 6% annual coupon bonds with a 10-year maturity, but it is interested in knowing its prospects for raising those funds under a series of different scenarios. To help Ford prepare these scenarios, you will have to find out what is Ford's current debt rating and the yield curve for its particular rating. For this, follow the outlined steps shown next.

5. Get a free username for www.standardandpoors.com, access the website and obtain the bond rating S&P has currently given to Ford Motor Co.’s Senior Unsecured Corporate debt in USD. What is the grade of such a rating? Is the probability of default currently high or low?

6. Assuming a Face Value of $1,000 and using all the data secured online thus far, calculate the fair value of the bond Ford intends to issue, discounting each one of the expected cash flows using the corresponding rate from the term structure data you constructed in Question 4. Assume Ford will preserves its current S&P debt rating for the foreseeable future. How many bonds will Ford need to sell to raise the desired funds? What will be the bond's Yield To Maturity and Current Yield?

7. Repeat the process in Question 6, but now assume that S&P will improve Ford's rating to the next notch available in the dataset. What will be the bond's fair price, Yield To Maturity, and Current Yield? How many bonds will Ford need to issue now to be able to raise the desired funds?

Explanation / Answer

5.) Rating is BBB which is lower medium grade, thereby they have adequate capacity to meet's its financial commitments however adverse economic conditions may have an impact on the organization this may lead them to weakened capacity.

6.) Hey i can give you the method just use the data set as per that by explaining for the same because the data set is not consistent.

Please do the process further I have explained the process rest you can apply and use the data of question 4.

Q7. Use this relation for Bond price and yield to maturity, Bond price = Cash flow1/(1+Yield)^1 + Cash flow2/(1+Yield)^2 .................. Cash flow N/(1+Yield)^N. how many bonds need's to be issued will depend upon the minimum criteria set by the credit rating agency as they have their criteria's and calculation as well as industrial outlook if everything is held constant ford needs to have a good track record of previous payments as well to get the rating notch in A.

Face value/(1+r)^years to maturity US$1.5 bil 6.375% deb due 02/01/2029 447.801506 Present value of face value of bond Take 2016 as base year and years to maturity will be date given-Base year US$1.5 bil 6.625% deb due 10/01/2028 463.1177962 Present value of face value of bond US$10.05 bil revolving bank ln due 04/30/2020 Present value of face value of bond US$10.7 bil revolver bank ln due 11/30/2017 Present value of face value of bond US$2 bil 4.75% sr unsecd nts due 01/15/2043 285.6545498 Present value of face value of bond US$200 mil 7.75% deb due 06/15/2043 106.5323813 Present value of face value of bond US$250 mil 7.50% deb due 08/01/2026 485.1939283 Present value of face value of bond US$288.402 mil 9.98% deb due 02/15/2047 52.39318791 Present value of face value of bond US$3.34 bil revolving bank ln due 04/30/2018 Present value of face value of bond US$300 mil 6.625% deb due 02/15/2028 463.1177962 Present value of face value of bond US$300 mil 7.125% deb due 11/15/2025 437.8345012 Present value of face value of bond US$300 mil 9.95% deb due 02/15/2032 219.2180251 Present value of face value of bond US$4.8 bil 7.45% Global Landmark Secs(GlobLS) nts due 07/16/2031 340.3327183 Present value of face value of bond US$4.95 bil 4.25% sr nts Convertible due 12/15/2036 659.5373023 Present value of face value of bond US$500 mil 6.50% deb due 08/01/2018 881.6592828 Present value of face value of bond US$500 mil 7.40% deb due 11/01/2046 Present value of face value of bond US$500 mil 7.70% deb due 05/15/2097 Present value of face value of bond US$501.918 mil 8.90% deb due 01/15/2032 Present value of face value of bond US$600 mil 7.50% nts due 06/10/2043 Present value of face value of bond US$700 mil 8.875% deb due 01/15/2022 Present value of face value of bond

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