Finance 4.5 Essay Example | Topics and Well Written Essays - 1750 words

Finance 4.5 - Essay Example The bond prices are different from part (a) and (b) in the question because interest rate is lowered. Bond prices are inversely proportional to interest rates therefore; as interest rate lowers, bond prices hike. This would eventually lead to lower yield. Therefore; in the above given scenario, the interest rates were lowered which caused the bond prices to rise. No, the bonds should not be called. The bonds should only be called if interest rates drop below coupon rate. This will give you the opportunity to call in your previous debt at a lower rate and then reissue debt at a lower interest rate if needed. The second scale will increase profits at a greater pace than scale one after q=3125 units. As the fixed cost is limited, and variable cost per unit is less therefore; the overall cost would be less than scale one. This means that even if the break even sales are  in the original cost function, the company would not face negative cash flow if it surpasses 142856 levels of sale because majority of the cost is of depreciation which is a non cash expense. Even though the company shows negative profits but that would not mean negative cash flow unless the level of sale is above 142561