CEG Capital Inc. is a large holding company that uses long-term debt extensively to fund its operations. At December 31, the company reported total assets of $100 million, total debt of $55 million, and total equity of $45 million. In January, the company issued $11 billion in long-term bonds to investors at par value. This was the largest debt issuance in the company’s history, and it significantly increased the company’s ratio of total debt to total equity. Five days after the debt issuance, CEG filed legal documents to prepare for an additional $50 billion long-term bond issue. As a result of this filing, the price of the $11 billion in bonds that the company issued earlier in the week dropped to 94 because of the increased risk associated with the company’s debt. The investors in the original $11 billion bond issuance were not informed of the company’s plans to issue additional debt so quickly after the initial bond issue.Did CEG Capital act unethically by not disclosing to initial bond investors itsimmediate plans to issue an additional $50 billion debt offering?
CEG Capital Inc. is a large holding company that uses long-term debt extensively to fund its operations. At December 31, the company reported total assets of $100 million, total debt of $55 million, and total equity of $45 million. In January, the company issued $11 billion in long-term bonds to investors at par value. This was the largest debt issuance in the company’s history, and it significantly increased the company’s ratio of total debt to total equity. Five days after the debt issuance, CEG filed legal documents to prepare for an additional $50 billion long-term bond issue. As a result of this filing, the price of the $11 billion in bonds that the company issued earlier in the week dropped to 94 because of the increased risk associated with the company’s debt. The investors in the original $11 billion bond issuance were not informed of the company’s plans to issue additional debt so quickly after the initial bond issue.Did CEG Capital act unethically by not disclosing to initial bond investors itsimmediate plans to issue an additional $50 billion debt offering?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
CEG Capital Inc. is a large holding company that uses long-term debt extensively to fund its operations. At December 31, the company reported total assets of $100 million, total debt of $55 million, and total equity of $45 million. In January, the company issued $11 billion in long-term bonds to investors at par value. This was the largest debt issuance in the company’s history, and it significantly increased the company’s ratio of total debt to total equity. Five days after the debt issuance, CEG filed legal documents to prepare for an additional $50 billion long-term bond issue. As a result of this filing, the price of the $11 billion in bonds that the company issued earlier in the week dropped to 94 because of the increased risk associated with the company’s debt. The investors in the original $11 billion bond issuance were not informed of the company’s plans to issue additional debt so quickly after the initial bond issue.
Did CEG Capital act unethically by not disclosing to initial bond investors its
immediate plans to issue an additional $50 billion debt offering?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
Expert Answers to Latest Homework Questions
Q: m₁ and m2 are connected by a light string as shown in the graph. Assume the pulley
is frictionless.…
Q: xf(x)
1-64
20
3
64
For the linear function f, the table shows three values of x and their…
Q: When the quadratic function f is graphed in the xy-plane, where y = f (x), its vertex is
(−3, 6).…
Q: An isosceles right triangle has a hypotenuse of length 58 inches. What is the perimeter, in
inches,…
Q: A 50 N of force F is applied to a block of 100 N in various ways. Assume the block is
initially at…
Q: Benjamin Franklin: Autobiographies are often written with a specific readership in mind. The author…
Q: Show detail.
Q: For the data set: {25, 4, 4, 7, 10, 13, 8, 3, 5, 8, 6, 3, 5. 6, 6, 5, 5, 10, 5, 7, 14, 6, 4} List…
Q: Please Original work
What are the three most important skills you will need to lead an international…
Q: What overall recommendations would you give to Kerry to make her diet healthier AND to lose weight?…
Q: expalain how its 210
Q: Now that you have seen an example of a typical Keto diet and have viewed Kerry's diet analysis…
Q: What would you recommend that Caleb change about his diet in order to meet his goals and to have a…
Q: explain why its 189
Q: For the data set: {25, 4, 4, 7, 10, 13, 8, 3, 5, 8, 6, 3, 5. 6, 6, 5, 5, 10, 5, 7, 14, 6, 4} Find…
Q: What are the points of discontinuity?
x-2
y = 2
x+5x-6
Q: expalain why it would be neither
Q: Will a 16:8 intermittent fasting dietary pattern help Caleb meet his goals of getting proper…
Q: What are the foci of the ellipse given by the equation 25x² + 16y² = 400?
(± 3,0)
(± 9, 0)
(0, ± 3)…
Q: Write an equation of the ellipse with foci at (0, ±12), and vertices at (0, ±13).
+2=1
x²
313
169
Q: In a neutralization reaction, 45.0 mL of 5.75 M HCL and 50 mL a calcium hydroxide solution are…