Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed

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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Equity Valuation Risk And Investment A Practitioners Roadmap

Authors: Peter C. Stimes

1st Edition

0470226404, 9780470226407

More Books

Students also viewed these Finance questions

Question

=+What is our leadership style like?

Answered: 1 week ago

Question

=+What are our core competencies or competitive advantages?

Answered: 1 week ago