Question
Hello, can you please help me with these questions for financial management? I'd greatly appreciate it. Thank you. Directions: The figures can be typed into
Hello, can you please help me with these questions for financial management? I'd greatly appreciate it. Thank you.
Directions:
The figures can be typed into the formula.
1.) Madoff Corporation raised money through a bond issue with a total principal value of $3,000,000. Each bond has a face (par) value of $1,000 and coupon rate of 6%. The company's applicable tax rate is 21%.
a) What is the annual coupon payment bond holders expect to receive?
b) What is the total after-tax annual interest expense to the company?
2.) A good friend is looking to buy a bond that pays semi-annual interest. The par value is $1,000 and the couponrate is 4%. Your friend plans to hold the bond to its maturity, which is 10 years from now.
If her required rate of return is 3%, what is the most you recommend your friend pay for the bond? (round to nearest cent)
3.) A preferred stock has a par value of $110 and pays an annual dividend of 5% of par.
If similar investments have an annual rate of return of 3%, what is the current value of this preferred stock. (round to nearest cent)
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