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4. You are running a very successful corporation, but need access to capital for new projects. You have two options: Option 1 is to issue
4. You are running a very successful corporation, but need access to capital for new projects. You have two options: Option 1 is to issue $45 million in new bonds to fund a single project. Option 2 is to issue $130 million in new bonds to fund two new projects. According to the credit rating agency, pursuing option 1 will result in moving from a current rating of A to a new rating of BBB. Pursuing option 2 will result in moving from a current rating of A to a new rating of BB. The following interest rates are attached to each credit rating: AAA AA A BBB BB B 5.80% 5.95% 6.12% 6.53% 7.11% 8.32% a. Calculate the amount of the payment under option 1. (5 points) b. Calculate the amount of the payment under option 2. (5 points)
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