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Suppose your company needs to raise $46 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond
Suppose your company needs to raise $46 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 8 percent and youre evaluating two issue alternatives: A semiannual coupon bond with a coupon rate of 8 percent and a zero coupon bond. Your companys tax rate is 22 percent. Assume a par value of $2,000.
1. How many of the zeroes would you need to issue to raise the $46 million?
2. In 20 years, what will your companys repayment on the face value of the bonds be if you issue the zero bonds?
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