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Aria Co. takes debt of $6 million in the beginning of FY 2021. The maturity of debt is 3 years, payments made annually. The company
Aria Co. takes debt of $6 million in the beginning of FY 2021. The maturity of debt is 3 years, payments made annually. The company is expected to earn EBITDA of $3 million, $ 3.6 million and $4 million in the years 2021, 2022 and 2023 respectively. Assume there are no taxes. Interest Rate is 10%. a. Assume that repayments are sculpted to ensure a constant DSCR of 1.2. Calculate the repayments done each year. b. Assume that the company makes repayments of $ 2 million each year. The syndication agreement has a provision of Cash Sweep. It states 70% of excess cash above 1.6 DSCR is swept by the lenders. In which year the cash will be swept and how much cash will be swept that year? c. Assume that the company makes repayments of $2 million each year. The syndication agreement has a provision of Cash Trap if the DSCR goes below 1.3. In which year the cash will be trapped and how much cash will be trapped that year
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