You are working as a financial analyst working under a stock broking firm, J.M. Finn & Co. Ltd in London. One company under your coverage of analysis, Quilter Chaviot Co. has just announced its bank approval on a nine-year loan. According to the news released in public media, the new financing will be used for the companys future business expansion, with that, you would like to conduct a thorough analysis of the new financing of the company. 1) Discuss the best analysis you should conduct based on the companys new debt financing. 2) Briefly explain how the news released could affect the companys current stock prices given the market is semi-strong efficient. 3) After your analysis, you find that the additional nine-year financing has taken up 90 percent of the total debt-to-total capital of the company. Elaborate on how this could affect the companys future financial performance.

4) Since the new loan is nine years long, you would like to conduct a long-term earnings forecast. Discuss in detail how to perform the earnings forecast and the limitation of the forecast. 5) You also find out that a portion of the seven-year financing will be expensed for research and development (R&D) purposes. Explain how the cost of R&D could affect the quality of earnings forecast.