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Tesla Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 30-year zero coupon bonds to raise the money.
Tesla Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 30-year zero coupon bonds to raise the money. The required return on the bonds will be 6 percent. Assume a par value of $1,000 and semiannual compounding.
1)Using the IRS amortization rule, what interest deduction can the company take on these bonds in the first year? In the last year?
2)Using the straight-line method, what interest deduction can the company take on these bonds in the first year? In the last year?.
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