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(Solution) - Jenkins Pharmaceuticals develops and produces prescription medic

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Jenkins Pharmaceuticals develops and produces prescription medications primarily for use in hospitals. The company has an outstanding $100,000,000, 30-year, 12% bond issued dated July 1, 2001. The bond issue is due June 30, 2031. The bond indenture requires a bond sinking fund, which has a balance of $12,000,000 as of July 1, 2007. The company is currently experiencing a shortage of funds due to a recent acquisition. Bob Snapple, the company's treasurer, is considering using the funds from the bond sinking fund to cover payroll and other bills that are coming due at the end of the month. Bob's brother-in-law is a trustee in a sinking fund, who has indicated willingness to allow Bob to use the funds from the sinking fund to temporarily meet the company's cash needs.
Discuss whether Bob's proposal is appropriate.


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This question was answered on: Jul 11, 2017

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