( Cost of debt ) Sincere Stationery Corporation needs to raise $700,000 to improve its manufacturing plant It has decided to issue a $1,000 par value bond with an annual coupon rate of 17 percent and a maturity of 15 years The investors require a rate of return of 8 percent a Compute the market value of the bonds b What will the net price be if flotation costs are 12 percent of the market price c How many bonds will the firm have to issue to receive the needed funds d What is the firm's after tax cost of debt if its marginal tax rate is 23 percent e Rework the problem as follows Assume a coupon rate of 8 percent f What effect does changing the coupon rate have on the firm's after tax cost of capital Why is there a change

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( Cost of debt ) Sincere Stationery Corporation needs to raise $700,000 to improve its manufacturing plant  It has decided to issue a $1,000 par value bond with an annual coupon rate of 17 percent and a maturity of 15 years  The investors require a rate of return of 8 percent  a  Compute the market value of the bonds  b  What will the net price be if flotation costs are 12 percent of the market price  c  How many bonds will the firm have to issue to receive the needed funds  d  What is the firm's after tax cost of debt if its marginal tax rate is 23 percent  e  Rework the problem as follows  Assume a coupon rate of 8 percent  f  What effect does changing the coupon rate have on the firm's after tax cost of capital  Why is there a change

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( Cost of debt ) Sincere Stationery Corporation needs to raise $700,000 to improve its manufacturing plant. It has decided to issue a $1,000 par

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