Asked by Sherrill

Mckenzie Corporation's Capital Budget. If the company announces that it is not expanding, what do you think will happen to the price of its bonds?
Answered by drwls
Unless there is a risk of bond default as a result of expansion, there should be no effect on bond price since it is only determined by the interest rate and term of the bond, and its rating.

If the company were borrowing by taking on additional debt, its bond rating could fall and the price would fall.
Answered by Reem
Dear sherill,

In term of McKenzie case study from the corporate fiance by Ross . Do you have the answers to the remaning questions ?
Answered by reem
If the company opts ( choose) not to expand, what is the implication for the company's future borrowing needs? What are the implications if company does expand?
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