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Darryl is looking to determine the difference in the cost of capital of debt between two debt issuers: Issuer One is selling the bond at
Darryl is looking to determine the difference in the cost of capital of debt between two debt issuers: Issuer One is selling the bond at par, with a face value of $900, and semi-annual coupon payments of $50. Issuer Two is selling his bond at par, with a face value of $1100 and coupon payments of $50 every six months. However, Issuer Two must pay issuing expenses of $40 per bond, and a discount of $20. Both bonds term to maturities are expected to be 10 years. Help Doug to determine the difference in the cost of capital between these two bonds? Assume a tax rate of 40%. 0.75% O 2.21% 5.40% 0.47% 2.43%
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