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NEMA Industries Inc. has issued a 4-year maturity, 16% coupon bonds with a total nominal value of 600,000. The bonds were sold at a 12%
NEMA Industries Inc. has issued a 4-year maturity, 16% coupon bonds with a total nominal value of 600,000. The bonds were sold at a 12% 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 corporate income tax rate is 22%. Compute the cost of this bond. Try 20% first.
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