Question
(10Marks) Supposeyourcompanyneedsto raise$20 million andyouwantto issue25yearbondsforthis purpose. Assumetherequiredreturn on yourbondissuewillbe 5percent and you're evaluatingtwo issuealternatives:a 5percentannualcoupon bondandazerocouponbond. Your company'staxrate is40percent. Required: (8marks) Comparethetwoalternatives,considering: thenumberofbonds that
- (10Marks)
Supposeyourcompanyneedsto raise$20 million andyouwantto issue25yearbondsforthis purpose. Assumetherequiredreturn on yourbondissuewillbe 5percent and you're evaluatingtwo issuealternatives:a 5percentannualcoupon bondandazerocouponbond. Your company'staxrate is40percent.
Required:
- (8marks) Comparethetwoalternatives,considering:
- thenumberofbonds that would needto beissued
- repaymentobligation
- aftertaxannualcashflowsforthefirstyear
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Financial Management for Public Health and Not for Profit Organizations
Authors: Steven A. Finkler, Thad Calabrese
4th edition
133060411, 132805669, 9780133060416, 978-0132805667
