1.What factors should a manager consider when deciding on the amount and type of long-term debt to be used to finance a business? 2.What factors should a manager consider when negotiating the covenants in a long termdebt agreement? 3.How can managers estimate their firms cost of longterm debt prior to meeting with alender? 4.Suppose that a specialty retail firm takes out a term loan from a bank. Which do you think the bank would prefer to receive as collateral, a claim on the firms inventory or itsreceivables? 5.A problem with collateral is that its value is positively correlated with the borrowersability to repay. Explain. 6.What factors should a manager consider when choosing between a term loan and a bondissue for funding long-term debt? 7.What factors might influence the choice between a bond issue with a sinking fund requirement and a serial bond issue? 8.How do project finance loans differ from other types of syndicated loans? 9.The Steel Pony Company, a maker of allterrain recreational vehicles, is having financial difficulties due to high interest payments. The estimated "going concern" value if Steel Pony is $4.0 million. The senior debt claim is on all fixed assets. The balance sheet of the firm is as shown: Current Assets $1,100,000 Senior Debt $2,200,000 Fixed Assets $2,900,000 Subordinated Debt $3,200,000 Stockholders Equity $2,000,000 If Steel Pony decides to file for formal bankruptcy and expects to sell the firm for the "going concern" value and pay administrative fees which amounts to 5% of the total going concern value, determine the distribution of the proceeds under the rules of absolute priority.