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You are the CFO of Carmean Corp. Carmean has decided to borrow $100,000,000 to finance expansion plans. One option is to issue 20-year bonds with
You are the CFO of Carmean Corp. Carmean has decided to borrow $100,000,000 to finance expansion plans. One option is to issue 20-year bonds with a fixed rate of 8%. Carmean's investment bankers believe that these will sell for par. Another option is to issue 20-year bonds with a variable rate of 1-yar LIBOR (Londen Interbank Offered Rate) plus 5.4%. For the first year, this will result in a 6.5% rate, but the rate will be adjusted annually.
- What types of things should you consider in making the decision about which borrowing option is best for Carmean?
Minimum 300 words, no copy-paste or plagiarism, please.
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