Question
(Cost of debt) Sincere Stationery Corporation needs to raise $516,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond
(Cost of debt)Sincere Stationery Corporation needs to raise $516,000 to improve its manufacturing plant. It has decided to issue a $1,000
par value bond with an annual coupon rate of 11.4 percent with interest paid semiannually and a 10-year
maturity. Investors require a rate of return of 8.1 percent.
a. Compute the market value of the bonds.
b.How many bonds will the firm have to issue to receive the needed funds?
c.What is the firm's after-tax cost of debt if the firm's tax rate is 34 percent?
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Applied Financial Macroeconomics And Investment Strategy
Authors: Robert T McGee
1st Edition
1137428394, 978-1137428394
