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need YTM A firm raises capital by selling $25,000 worth of debt with flotation costs equal to 1% of its par value. If the debt
need YTM
A firm raises capital by selling $25,000 worth of debt with flotation costs equal to 1% of its par value. If the debt matures in 10 years and has an annual coupon interest rate of 12%, what is the bond's YTM? A relatively quick method for finding the before-tax cost of debt is to observe the yield to maturity (YTM) on the firm's existing bonds or bonds of similar risk issued by other companies. This approach finds the before-tax cost of debt by calculating the YTM generated by the bond cash flows. From the issuer's point of view, this value is the cost to maturity of the cash flows associated with the debt. The yield to maturity can be calculated by using a financial calculator or an electronic spreadsheet Step by Step Solution
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