Question
Suppose your company needs to raise $42 million and you want to issue 25-year bonds for this purpose. Assume the required return on your bond
Suppose your company needs to raise $42 million and you want to issue 25-year bonds for this purpose. Assume the required return on your bond issue will be 7 percent, and youre evaluating two issue alternatives: A semiannual coupon bond with a coupon rate of 7 percent and a zero coupon bond. Your companys tax rate is 30 percent. Both bonds will have a par value of $1,000. |
How many of the coupon bonds would you need to issue to raise the $42 million?
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