The Fire-Keepers Casino is in the process of issuing a 25-year, 9% coupon (paid semi-annually) AA2-rated corporate
Question:
The Fire-Keepers Casino is in the process of issuing a 25-year, 9% coupon (paid semi-annually) AA2-rated corporate bond with $1000 par value. If by the time the bonds receive SEC clearance, the market yield on this bond goes to 9.35%, and the company sells 25000 of these bonds with the help of an investment banker who charges them a commission rate of 2.5% on the proceeds, what will the total proceeds be for the issuing company, and what is the cost of these bonds to the firm in terms of the cost of capital? What are the firm’s future cash obligations?
Coupon A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...
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PY2CY2N50PMT45FV1000I935 PV 96638 Gross proceeds from sale of bonds 2500966382415946813 ...View the full answer
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