S & S Air Case Study
S & S Air:
Case Study: S & S Air’s Mortgage
3001-3 FNCE Financial Management
Week 4
William Jones October 9th, 2012
Case Study: S & S Air’s Mortgage
Background:
S&S Air manufactures light aircraft. The owners of S & S Air, Mark Sexton and Todd Story, were impressed by the work Chris had done on financial planning. By using Chris’s analysis and looking at the demand for light aircraft, they decided that their existing fabrication equipment was sufficient, but that it was time to acquire a bigger manufacturing facility (Ross, Westerfield, & Jordan, 2011, p. 161). Rather than building a new facility they have found a suitable building for renovation at an estimated expense of $22 million dollars. Mark and Todd have met with their loan officer, Christie Vaughn, who has given them information on various types of loan and payment structures. Here is a table showing those options:
Term Rate Frequency Payment Amount
30 Years 6.10% Monthly $ 133,318.85
30 Years 6.10% Bi-Weekly $ 66,659.43
20 Years 6.10% Monthly $ 158,886.65
5 Year Balloon 6.10% Monthly $ 133,318.85
10 Year IO 3.50% Monthly $ 203,630.37
Satisfied with the options provided to them by the bank, Mark and Todd have asked Chris to answer several questions to help them choose the correct mortgage (Ross, Westerfield, & Jordan, 2011, p. 161). The answers to these questions are provided in the addendum for review as well as the accompanying financial computations.
Identify what you believe to be the key issues:
There are several issues that Mark and Todd need to consider before moving forward with this project. The first issue that needs to be addressed is whether or not Mark and Todd have reviewed S & S Air’s financial statements. The information provided by Chris in the text is limited, as no financial statements for the company have been provided. Chris’s ability to assess the liquidity of the business, identify
Case Study: S & S Air’s Mortgage
3001-3 FNCE Financial Management
Week 4
William Jones October 9th, 2012
Case Study: S & S Air’s Mortgage
Background:
S&S Air manufactures light aircraft. The owners of S & S Air, Mark Sexton and Todd Story, were impressed by the work Chris had done on financial planning. By using Chris’s analysis and looking at the demand for light aircraft, they decided that their existing fabrication equipment was sufficient, but that it was time to acquire a bigger manufacturing facility (Ross, Westerfield, & Jordan, 2011, p. 161). Rather than building a new facility they have found a suitable building for renovation at an estimated expense of $22 million dollars. Mark and Todd have met with their loan officer, Christie Vaughn, who has given them information on various types of loan and payment structures. Here is a table showing those options:
Term Rate Frequency Payment Amount
30 Years 6.10% Monthly $ 133,318.85
30 Years 6.10% Bi-Weekly $ 66,659.43
20 Years 6.10% Monthly $ 158,886.65
5 Year Balloon 6.10% Monthly $ 133,318.85
10 Year IO 3.50% Monthly $ 203,630.37
Satisfied with the options provided to them by the bank, Mark and Todd have asked Chris to answer several questions to help them choose the correct mortgage (Ross, Westerfield, & Jordan, 2011, p. 161). The answers to these questions are provided in the addendum for review as well as the accompanying financial computations.
Identify what you believe to be the key issues:
There are several issues that Mark and Todd need to consider before moving forward with this project. The first issue that needs to be addressed is whether or not Mark and Todd have reviewed S & S Air’s financial statements. The information provided by Chris in the text is limited, as no financial statements for the company have been provided. Chris’s ability to assess the liquidity of the business, identify
References: Calculatoredge. (n.d.). Retrieved November 3, 2012, from http://www.calculatoredge.com/finance/biweekly.htm Fraser, L Ross, S. A., Westerfield, R. W., & Jordan, B. D. (Eds.). (2011). Essentials of corporate finance (7th ed., Rev.). New York, NY: McGraw-Hill Irwin.