Microfinance Company needs to raise $800,000 to improve the position of cash. It has decided to issue
Question:
Microfinance Company needs to raise $800,000 to improve the position of cash. It has decided to issue a $1,000 par value bond with 15 percent annual coupon rate and 5-year maturity. The investors require 16 percent rate of return.
a. Compute the market value of bonds.
b. What will the net price if the floatation cost is 5 percent of the market price?
c. How many bonds will the company have to issue to receive $800,000?
d. What is the company’s after-tax cost of debt if the average tax rate is 20 percent and the marginal tax rate is 30 percent?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Foundations Of Finance
ISBN: 9781292155135
9th Global Edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty
Question Posted: