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Essay S & S Air Case Study

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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 …show more content…

Mark and Todd should consider the monthly payment and the ability of the company to repay the loan. If S & S Air can afford to pay a higher payment, they can pay down the principal faster. Assuming the bank will not charge a fee for an early payoff; S & S could save money and avoid the risk associated with the balloon payment option or interest-only loan. By taking the 20 year loan option and making additional principal payments to decrease the interest owed, S & S could pay off a 20 year loan in 158 months. The following table illustrates the option presented above:

If Mark and Todd choose this option, they could budget accordingly each month. If they are struggling they could forgo the additional principal payment during any given month. By choosing this option, S & S Air could save money and have flexibility in the mortgage payments. References
Calculatoredge. (n.d.). Retrieved November 3, 2012, from http://www.calculatoredge.com/finance/biweekly.htm
Fraser, L. M., & Ormiston, A. (201). Understanding financial statements (9th ed.). Upper Saddle River, NJ: Prentice Hall.
Ross, S. A., Westerfield, R. W., & Jordan, B. D. (Eds.). (2011). Essentials of corporate finance (7th ed., Rev.). New York, NY: McGraw-Hill Irwin.

Addendum
Discussion Problems and Calculations
Question #1: What are the monthly payments for a

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