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Raising additional capital by debt,equity and merger

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Using the scenarios given in Week 2, calculate the capital that Blue Sky Airlines needs and indicate what sources you will use in your capital plan. Assume that if you go bankrupt you will only be able to secure debt based on aircraft assets - unsecured debt or stock sales options will not be available to you for the duration of the plan, except for a union with another carrier by merging at a price of $3 per share.

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Revised income statement
first year second year third year
Revenue 520 441 551.25

operating cost 338.4 338.4 338.4
gross profit 181.6 102.6 212.85
general management and admn expenses 103 103 103
int on debt 100 100 100
operating loss -21.4 -100.4 9.85
option:2
IF SECURED DEBT ON AIRCRAFT ASSET IS USED, AND ASSUME 10% IS THE INTEREST ON SECURED DEBT, THEN THE POSITION WILL BE
The company has been ...

Solution Summary

This solution contains the detailed illustrations for raising capital through secured debt, unsecured debt, equity capital or merging with other companies to improve its equity base.

$2.19