Flying High plc plans to expand rapidly over the next five years and is considering the following

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Flying High plc plans to expand rapidly over the next five years and is considering the following forms of finance to support that expansion.

(a) A five-year £10 million floating-rate term loan from MidBarc Bank plc at an initial annual interest rate of 9 percent.

(b) A five-year Eurodollar bond fixed at 8 per cent per year with a nominal value of US$15 million. The current exchange rate is €1.50 to £1.

(c) A £10 million convertible bond offering a yield to redemption of 6 per cent and a conversion premium of 15 percent.

As the financial adviser to the board you have been asked to explain each of these forms of finance and point out the relative advantages and drawbacks. Do this in report form.

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