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Narstek Inc. has decided to issue a 4-year maturity, 15% coupon bonds with a total nominal value of 300 million . The bonds were

 

Narstek Inc. has decided to issue a 4-year maturity, 15% coupon bonds with a total nominal value of 300 million . The bonds were sold at a 10% discount and floatation costs amounted to 5% of the total nominal value. The principal will be repaid in equal installments after the first year in which there will be no payment. The tax rate is 22%. Compute the cost of this bond issue. Try 18% first.

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To calculate the cost of the bond issue we need to find the total amount of cash outflows ie cost that Narstek Inc will incur The cost will be calcula... blur-text-image

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