Question
All questions are related to various aspects of the BrissyK Pvt Limited. Brissy is a proficient beauty therapist living in District 7 of the Ho
All questions are related to various aspects of the BrissyK Pvt Limited.
Brissy is a proficient beauty therapist living in District 7 of the Ho Chi Minh City. She currently works for a famous beauty Salon in District 1 and also provides her service through home visits for her customers living in District 7 during her spare time. With her long-term experience in working in successful and popular beauty salons in the city, she has gathered a good knowledge on how to conduct this business and the importance of providing an excellent customer service. As she has a significant personal customer base in District 7, she realised that it is the right time for her to start her own business in District 7. After much thought, Brissy decided to invest in a womens beauty salon in Phu My Hung area. This salon will provide both hairdressing services such as cutting, styling and colouring, beauty therapy services including facials, manicures and pedicures, and massages. She already holds some formal qualifications in beauty therapy and hair dressing that she can showcase to gain her customer confidence. However, she has not received any formal education on business management. She is confident that she will be able to start her business with her regular home visit customers in District 7 and her current customers in District 7 loved the idea of getting both hair services and beauty therapy services at one place.
Question 4: Still looking for funds debt capital (20 marks)
After some discussion,Brissy agrees that borrowing makes sense for her business in the future. However,Brissy has never had any experience in involving with the financial market, in particular the bond market. You are required to provide the following experts advice to her.
- Briefly explain pros and cons of issuing bonds in comparison of issuing stocks?
[8marks]
- An annual coupon bond issued by the Rainbow Beauty Company five years ago has finally been selected as a comparable bond for Brissys listed company in the future. This bond has 20 years to maturity at the issuance with a coupon rate of 6% per year. Given its level of risk, investors will accept an expected return of 5% for investing on this bond with the face value of $1,000. What should be the price of this bond? [5marks]
- Given the current situation of rising inflation rates and interest rates in the countries,briefly explain the impact of rising interest rates on the bond markets. Would you adviseBrissyto issue bonds to raise more capital in this situation?Explain within 250 words and addreferences, additional data or information, if required. [7marks]
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