Question: (a) Denmark Cookie Co is looking to fund a new factory and production facilities to produce cakes for 12 years with debt financing. Explain

(a) Denmark Cookie Co is looking to fund a new factory and production facilities to produce cakes for 12 years with debt financing. Explain why loan covenants are imposed on the borrowings of this company. [3 marks] (b) List an example of a negative covenant that could be imposed. [2 marks] (c) Detail one type of debt arrangement/security that would be appropriate for Denmark Cookie Co in this situation. Justify your choice(s). [5 marks]

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a Loan covenants are imposed on the borrowings of Denmark Cookie Co for several reasons 1 Risk Mitigation Lenders impose loan covenants to mitigate th... View full answer

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