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NEED HELP WITH STEP D You need to raise $ 1 , 0 0 0 , 0 0 0 to buy a dam that will
NEED HELP WITH STEP D
You need to raise $ to buy a dam that will provide energy to your town. Your tax rate is You would like to finance the transaction by issuing vear bonds at a coupon rate, payable annually.
a What is your beforetax and aftertax "cost of money" taking into account that the coupon payments on the bonds are taxdeductible, but not the repayment of principal in year if the bonds sell for face value? Briefly discuss your results. Solution: beforetax: aftertax: per year.
b Would this financing option be good enough to consider if your minimum acceptable rate of return was
c Would this financing option be good enough to consider if your minimum acceptable rate of return was
d What's the price of the bond at a MARR per year? Use a beforetax analysis and solve manuallv ie using factor notation Solution: $
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