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Your company needs to raise $41 million to finance a new factory. You're evaluating two different 20-year bonds to raise these funds: a coupon bond
Your company needs to raise $41 million to finance a new factory. You're evaluating two different 20-year bonds to raise these funds: a coupon bond with an annual coupon rate of 8 percent; and a zero coupon bond. Your company's tax rate is 40 percent Both bonds will have a par value of $1,000, and a required annual return of 8 percent with semi-annual compounding. How many of the coupon bonds would you need to issue to raise the $41 million? Number of coupon bonds How many of the zeroes would you need to issue? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Number of zero coupon bonds In 20 years, what will your company's repayment be if you issue the coupon bonds? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, i.e. 1, 234, 567.) Coupon bonds repayment What is the repayment if you issue the zeroes? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, i.e. 1, 234, 567.) Zeroes repayment Calculate your company's total aftertax cash flow during the first year for each type of bond (don't include the initial amount raised). Don't forget to adjust the cash flow for taxes. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, i.e. 1, 234, 567.)
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