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An article that appeared in January of 2000 in BusinessFinanceMag.com entitled, "The Next Generation Enterprise," (see https://businessfinancemag.com/article/next-generation-enterprise-0101) covers insights by Steven L.Goldman, a well-respected consultant and distinguished professor at Lehigh University. As an expert in the area of industrial competitiveness, the author discusses the role corporate finance plays in helping companies become effective in rapidly changing markets. After reading this article, answer the following questions:
1. How does Dr. Goldman define a "Next Generation Enterprise?"
2. One of the factors that Dr. Goldman identifies as being different in Next Generation Enterprises is the ability to make quick decisions. Briefly explain.
3. What is the challenge that Dr. Goldman identifies for the finance professional in the Next Generation Enterprise?
Synthetic Debt
This issue has three parts.
The investment banking firms and major corporations have worked together to use derivatives to implement financing strategies that reduce costs and or risks associated with traditional instruments. This activity is generally known as structured finance or financial engineering. It involves the combination of traditional instruments and derivative instruments such as options. One such instrument, called putable/callable reset bonds or term enhanced marketable securities, is described in an article entitled, "Can Synthetic Debt Give Authentic Savings?" (see https://donthaveanytitle.blogspot.com/2006/05/can-synthetic-debt-give-authentic.html). After reading the article, answer the following questions:
1. What are putable/callable reset bonds?
2. What potential advantage does the corporation receive for offering this type of security?
3. What is the offsetting feature or downside risk associated with this type of security?