Solar Industries develops and produces high efficiency

solar panels The company

Solar Industries develops and produces high efficiency solar panels The company

Solar Industries develops and produces high-efficiency solar panels. The company has an
outstanding $10,000,000, 30-year, 10% bond issue dated July 1, 2011. The bond issue is due
June 30, 2040. Some bond indentures require the corporation issuing the bonds to transfer
cash to a special cash fund, called a sinking fund, over the life of the bond. Such funds help
assure investors that there will be adequate cash to pay the bonds at their maturity date.
The bond indenture requires a bond sinking fund, which has a balance of $1,200,000 as of July
1, 2016. The company is currently experiencing a shortage of funds due to a recent acquisition.
Bob Lachgar, 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, a trustee of Solar's sinking fund, has indicated a 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?

Solar Industries develops and produces high efficiency solar panels The company
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