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Suppose your company needs to raise $65 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 $65 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 4.9 percent, and youre evaluating two issue alternatives: a semiannual coupon bond with a coupon rate of 4.9 percent and a zero coupon bond. The tax rate is 21 percent. Both bonds will have a par value of $1,000. Assume that the IRS amortization rules apply for the zero coupon bonds. Calculate the firms aftertax cash outflows for the first year under the two different scenarios
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