A Commercial Loan and a Long-Term Bond

Discuss what areas of the income statement and balance sheet would be impacted by a new $50,000,000 debt in the form of a long-term bond.

The management of Netflix has approached your bank about borrowing $50,000,000 in the form of a long-term bond. The bond would have a 30-year maturity and an 8% coupon rate.

• The first step is to calculate what the interest expense would be for this bond for Netflix on a monthly basis.
• Next, discuss what areas of the income statement and balance sheet would be impacted by this new debt and how.
• Finally, write a one-page recommendation to your credit committee regarding the approval of this loan.