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Smith Stationary Ltd needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 face value bond wth a 8%

  1. Smith Stationary Ltd needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 face value bond wth a 8% annual coupon rate paid semi- annually and a 5-year maturity. The investors require 10% rate of return.

    1. Calculate the price of this bond. How many bonds need to be issued to receive the

      required amount of fund?

    2. What is the firm after-taxed cost of debt given the tax rate is 30%.

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