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Sheridan Co. needs to borrow $21.50 million for a factory equipment upgrade. Management decides to sell 10-year bonds. They determine that the 3-month Treasury bill
Sheridan Co. needs to borrow $21.50 million for a factory equipment upgrade. Management decides to sell 10-year bonds. They determine that the 3-month Treasury bill yields 4.16 percent, the firms credit rating is AA, and the yield on 10-year Treasury bonds is 1.07 percent higher than that for 3-month bills. Right now, AA bond rates are 1.23 percent above the 10-year Treasury bond rate. What is the borrowing cost for this transaction?
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